Addis Ababa University

College of Business & Economics

Department of Accounting & Finance
Graduate Program

IFRS Adoption in Ethiopia: A Critical Analysis of the Process, Issues and

Implications.

By:

Yitayew Mihret

March, 2016

Addis Ababa, Ethiopia

 Addis Ababa University
College of Business & Economics
Department of Accounting & Finance
(Graduate Program)

IFRS Adoption in Ethiopia: A Critical Analysis of the Process, Issues and

Implications.

A Thesis Submitted to the School of Graduate Studies of Addis Ababa

University in Partial Fulfillment of the Requirements for
the Degree of Master of Science in Accounting and Finance

By:

Yitayew Mihret

Advisor: Dr. Degefa Duressa

March, 2016

Addis Ababa, Ethiopia

I
 Addis Ababa University
College of Business & Economics
Department of Accounting & Finance
(Graduate Program)

IFRS Adoption in Ethiopia: A Critical Analysis of the Process, Issues and

Implications.

By:

Yitayew Mihret

Approved by the Board of Examiners:

––––––––––––––––––––––––––––––––––––––– ––––––––––––

Advisor Signature

–––––––––––––––––––––––––––––––––––––––– –––––––––––

Examiner Signature

–––––––––––––––––––––––––––––––––––––––– –––––––––

Examiner Signature

II
Statement of Declaration

I, the undersigned, declare that this thesis is my original work, has not been presented for
award in any other university and that all sources of materials used for the thesis have
been duly acknowledged.

Declared by: Confirmed by:

Name: Yitayew Mihret Name: Dr. Degefa

Duressa

Signature––––––––––––––––––– Signature–––––––––––––––

Date––––––––––––––––––––––– Date––––––––––––––––––

Place and date of submission: Addis Ababa University, March, 2016

III
 Abstract

This study examines the IFRS adoption process in Ethiopia with a view to explaining how
the state, i.e., the Ethiopian government, other national actors and the transnational
forces interacted in establishing the Ethiopian financial regulatory landscape as
antecedent to IFRS adoption and subsequent implementation. It employs a qualitative
research approach based on evidence collected through semi-structured interview and
review of documentary evidences produced in the process of IFRS adoption to explain the
outcomes of accounting reforms in Ethiopia during the period 1991-2015. By drawing on
Actor Network Theory (ANT), this study theorizes IFRS adoption as a product of a series
of translations in the context of interactions between supranational and national actors to
integrate Ethiopia into the global economic system through IFRS-based financial
reporting. Improved financial reporting environment supported by IFRS is theorized as a
key Obligatory Passage Point (OPP) for Ethiopia’s access to external finance and this in
turn led to the development of a streamlined national accounting regulatory system
through translation of institutions into a framework suitable for IFRS-based financial
reporting. The country’s accounting infrastructures and regulatory environment were
thoroughly evaluated and examined in a transformation process through which the
globalizing forces and Ethiopian actors built an actor-network that reconstructed the
Ethiopian accounting regulatory set up by issuing financial reporting law and
establishing the regulatory body (AABE). Accordingly, the country has mandated
officially the adoption of IFRS and designed and approved five years IFRS
implementation strategic plan for which its implementation is expected to be effected in
the years to come until 2019 deadline. This study illustrates that the IFRS adoption in
Ethiopia is the result of the translation processes involving the actor-networks of the
state, accounting, professionals, the private sector and international financial institutions
while the state, i.e., the Ethiopian government, played a management and mediating role
of the translation processes in the context of promoting macro-economic management
rationales of enhanced financial reporting supported by IFRS .The study shows that
while the Ethiopian IFRS adoption experience illustrates the macro-economic rationale
driven nature of IFRS adoption, the rationales and the processes of translating the idea
into Ethiopian context illustrates the socially constructed nature of IFRS adoption. This
study suggests that more resources and stakeholders need to be coordinated by AABE to
build the capacity of preparers in terms of IFRS reporting practices to achieve the IFRS
implementation strategic objectives. It suggests that self regulated, independent and
strong professional body needs to be established as soon as possible. It suggests that the
concerned stakeholders need to design and incorporate IFRS education in the curriculum
as soon as possible to meet the IFRS implementation strategic objectives.

Keywords: Accounting; Developing countries; Ethiopia; IFRS adoption

I
 Acknowledgements

I would like to express my sincere gratitude to Dr. Degefa Duressa, my advisor, for his
unreserved comments, advice, suggestions and guidance that he made on the paper from
the inception to the completion of the study. I also would like to thank him for his
support in providing me the necessary materials required for the study.

I am very much indebted to Dr. Dessalegn Getie, for his unreserved and enormous
support, advice, comprehensive comments and guidance since the inception of the study
to its completion. This study would not have been conducted and completed without his
support in providing the necessary materials and guidance including the initiation of the
study project.

I greatly acknowledge distinguished members of Deloitte Consulting for their

cooperation in providing me the relevant data required for the study. I am highly
indebted for their cooperation and professional support in providing me the necessary
data and reflections required for the study.

My sincere thanks go to employees and higher officials of MoFED and NBE for their
cooperation in providing me the necessary documents and reflections required for the
study. I would like to extend my appreciation to them for their support in providing me
valuable inputs that enhanced the credibility of the data sources of the study.

I would like to extend my sincere gratitude to the accounting academia and audit firm
members who helped me in providing valuable reflections required for the study. I would
like to give you credit to your cooperation and support for your valuable inputs.

Finally, I never forget to extend my appreciation and credit to you all whom I did not
mention your names for your valuable support and contribution for this study. I am
highly indebted to all of you for your support and cooperation in providing me the
necessary inputs required for the study.

II
 Table of Contents

Contents Pages

Abstract ...................................................................................................................... I
Acknowledgements .................................................................................................... II
List of Tables ............................................................................................................. V
List of Abbreviations ................................................................................................VI
Chapter One: Introduction ........................................................................................... 1
1.1 Background of the study......................................................................................... 1
1.2 Statement of the Problem ....................................................................................... 4
1.3 Objective of the Study ............................................................................................ 6
1.4 Significance of the Study........................................................................................ 7
1.5 Scope of the Study ................................................................................................. 8
1.6 Limitation of the Study........................................................................................... 8
1.7 Motivations of IFRS adoption in Ethiopia and Study Setting .................................. 9
1.8 Structure of the Paper ........................................................................................... 11
ChapterTwo:Literature Review .................................................................................. 12
2.1. Introduction......................................................................................................... 12
2.2. Overview of Internationalization of Accounting Standards .................................. 12
2.3 Historical Background of Internationalization of Accounting Standards ............... 14
2.4 Harmonization, Convergence and Adoption of IFRS ............................................ 15
2.5 Rationales and Debates of IFRS Adoption ............................................................ 16
2.6 Benefits of IFRS Adoption ................................................................................... 19
2.7 Challenges of IFRS Adoption ............................................................................... 21
2.8 Actor-Network Theory: Concepts and Analytical Frameworks ............................. 22
2.9 Empirical Evidences: Lessons Learned from Other Countries’ Experience ........... 22
2.9.1 Evidences from Case Studies ............................................................................. 29
2.9.2 IFRS Adoption and Implimentation : Korean Exprience .................................... 29
2.10 Conclusion and Research Gap ............................................................................ 32
Chapter Three:Research Design and Methodology ................................................... 34
3.1 Research Design ................................................................................................... 34

III
 3.2 Research Approach .............................................................................................. 34
3.3 Selection of Interview Particpants ....................................................................... 35
3.4 Sources and Methods of Data Collection .............................................................. 35
3.5 Data Analysis and Interpretation .......................................................................... 39
Chapter Four:Discussions and Results ....................................................................... 40
4.1 Introduction.......................................................................................................... 40
4.2 Accounting Reforms and Pre-IFRS framework Issues the Basis to the
Problematisation for IFRS Adoption in Ethiopia .................................................. 40
4.3 Institutionalization of the Ethiopian Accounting System with IFRS based
Infrastructure ....................................................................................................... 43
4.3.1 Problematization &Intersessement:A Series of Translations leading to IFRS
Adoption..................................................................................................... 43
4.3.2 Enrolment and Mobilization: Establishment of the Ethiopian Accounting
andRegulatory Environment ....................................................................... 50
4.3.2.1 Ethiopian Financial Reporting Proclamation and Regulation .......................... 50
4.3.2.2 Establishment of the Accountants and Auditors Board of Ethiopia(AABE)..... 60
4.3.2.3 Institute of Certified Public Accountants of Ethiopia (ICPAE) ........................ 62
4.4 Enrolment and Mobilization: Implementation of IFRS by Reporting Entities........ 64
4.5 Analysis and Discussions of the Results ............................................................... 73
Chapter Five:Conclusions and Implications .............................................................. 76
5.1 Conclusions .......................................................................................................... 76
5.2 Implications ......................................................................................................... 77
5.3 Potential Future Research Areas ......................................................................... 79
References …………………………………………………………………………………...80

Appendix

IV
List of Tables

Table 1: Translation process of the Ethiopian IFRS adoption process …………32

Table 2: Interviewees profiles, roles, interview dates and duration…………………36

Table3: Actors of Ethiopian IFRS adoption process….…………………………56

V
 Abbreviations

Acronym Definitions

AABE Accountants and Auditors Board of Ethiopia

AAU Addis Ababa University

ACCA Association of Chartered Certified Accountants

AEA Association of External Auditors

AISG Accountants International Study Group

ANT Actor-Network Theory

ASE Accounting Society of Ethiopia

ECSC Ethiopian Civil Service College

ECX Ethiopian Commodity Exchange

EPAAA Ethiopian Professional Association of Accountants and Auditors

ERCA Ethiopian Revenue and Customs Authority

FDI Foreign Direct Investment

FDRE Federal Democratic Republic of Ethiopia

G20 Group of 20 Countries

GAAP General Accepted Accounting Principles

IAS International Accounting Standards

IASB International Accounting Standards Board

IASC International Accounting Standards Committee

ICAA Institute for Certifying Accountants and Auditors

ICPAE Institute of Certified Public Accountants for Ethiopia

IFAC International Federation of Accountants

VI
IFI International Financial Institution

IFRS International Financial Reporting Standards

IIA Institute of Internal Auditors

IMF International Monetary Fund

IOSCO International Organization of Securities Commission

ISA International Standards for Auditing

KASB Korean Accounting Standards Board

MCB Ministry of Capacity Building

MNCs Multi-National Companies

MoFED Ministry of Finance and Economic Development

NAADP National Accounting and Auditing Development Program

NBE National Bank of Ethiopia

NGO Non-Governmental Organization

NSC National Steering Committee

OFAG Office of the Federal Audit General

OPP Obligatory Passage Point

PAFA Pan African Federation of Accountants

ROSC Reports on Observance of Standards and Codes

SMEs Small and Medium Enterprises

SNIs Supranational Institutions

UNCTAD United Nations Conference on Trade and Development

WB World Bank

WTO World Trade Organization

VII
 Chapter One

Introduction

1.1 Background of the Study

Many countries and regions around the world have different financial reporting and
accounting practices, which emanate from varying legal, culture, economic, social and
political contexts (Deng, 2013). Heterogeneous financial reporting and accounting
practices make it very difficult for users of accounting and financial reports to
consolidate such information and make comparisons of firms that are listed in different
countries (Prather-Kensey, 2006). Furthermore, in today’s world with globalization,
boundaries between countries and financial markets have been removed and mutual
interdependence has increased. The growth of multinational company activities,
economic and political integrations between developed countries increases the efforts of
developing countries to be part of the global market which in turn requires quality and
transparent financial information (Alp and Ustundang, 2009). Today with
internationalization of economic trade and globalization of businesses, preparation of
financial statements in accordance with a nation’s local accounting systems may hardly
meet the needs of investors, business partners, financiers and decision makers (Gyasi,
2009). Economic globalization will lead to integration of capital markets throughout the
world and the process of that integration can be facilitated through technologies like a
globalized financial reporting architecture. With the effect of globalization, more and
more countries are to open their doors to foreign investment leading to businesses
expansion across borders; both the public and private sectors are increasingly
recognizing the benefits of having a commonly understood financial reporting
framework supported by strong globally accepted accounting and auditing standards
(Wong, 2004). Accordingly, the introduction of a single set of high quality,
understandable, enforceable and globally accepted financial reporting standards based
upon articulated principles have been required (IASB).

International Financial Reporting Standards (IFRS) is gaining fast growing recognition

around the world as countries and institutions such as capital market regulators, global
1
banking regulators, international development agencies, professional accountants and
politicians all recognize the economic benefits embedded in the adoption of the standards
(Botzem,2012; Botzem & Quack,2009: cited in Zori,2015). The adoption of these
standards as a replacement for local accounting standards is a signal of the move towards
global governance of private regulation around financial markets and an increasing
integration of world markets, free movement of goods and services, and the flow of
investment capital across national boundaries. While standardization in accounting
practices is important in many respects, particularly towards increasing comparability
and uniformity of financial reports for companies operating in transnational boundaries
across the world, it is still debatable to consider the notion that these standards are usable
in all countries around the world.

Proponents of the globalized accounting standards present numerous arguments and

perceived economic benefits associated with the adoption of IFRS in to local
jurisdictions. These arguments could be reasonable to countries with capital markets with
a notion that IFRS is predominantly designed for capital market oriented economies
(Zori, 2015).

Nevertheless, in many countries, the idea of a globalized accounting standard still seems
illusive; still the notion of economic benefits claimed by single set of globalized
accounting standards is subject to criticism on the grounds that the globalized financial
reporting system, which is designed based on western economic structures may not be
effective in the context of the developing nations’ economic realities. Why debates arise
about the adoption/adaption of IFRS in spite of its founding rationales, economic
benefits? What motivates a country’s decision to adopt the standards and what important
considerations are taken into account prior to the adoption of the standards?

Following the effects of globalization and the World Bank & IMF joint study of the
Ethiopian accounting system (ROSC, 2007), now Ethiopia has already embarked on
adopting IFRS formally in her accounting system by issuing proclamation No.847/2014
for financial reporting and regulation No. 332/2014 “for the establishment and
determination of the procedure of the accounting and auditing board of Ethiopia”. As
per the World Bank report (ROSC, 2007), significant gaps were indicated in the

2
Ethiopian accounting system and financial reporting infrastructures and legal
frameworks. Strong financial infrastructures and legal frameworks in a given jurisdiction
could be prerequisites or preconditions that would be required for the effectiveness of
IFRS adoption and implementation.

Accordingly, the study aims to explore how the IFRS adoption agenda get materialized
and translated in the non-stock market economy of Ethiopia given the gaps indicated in
the Ethiopian accounting system and related legal frameworks. This study focuses on the
actor-network interaction of the national and international actors for the establishment of
financial reporting and regulatory set up of IFRS in Ethiopia, which suggests that the
economic benefit rationales of IFRS adoption alone cannot sufficiently explain IFRS
adoption in the context of Ethiopia. This study focuses on the social construction of
actor-network building to explain why and how the IFRS adoption idea is originated,
developed and translated in to practice in the context of establishing the financial
reporting and regulatory framework and the regulatory body to the Ethiopian non-capital
market economic environment. The study tries to understand the institutional
arrangements that Ethiopia takes in to account when considering the adoption of IFRS.
Even though economic benefits are essential to the adoption of IFRS, the actions and
interests of actors in the choice of IFRS adoption practices are influenced by institutional
discourses, which shape the outcome of the IFRS adoption decisions. This study shows
how actors from different backgrounds negotiate their interests and present their views
on the way to improve the Ethiopian financial reporting infrastructure through the
institutionalization of the Ethiopian accounting system in the context of the globalized
economic infrastructure (IFRS), which finally led to the issuance of the financial
reporting proclamation and regulation for the establishment of the regulatory board, a
milestone for IFRS adoption in Ethiopia. Accordingly, this study aims to examine the
overall process of IFRS Adoption in Ethiopia, related issues and implications in the
context of actor-network construction involving the interactions of supranational forces
(IFIs) and Ethiopian actors while translating the Ethiopian accounting system into a new
form suitable to IFRS based financial reporting.

3
1.2 Statement of the Problem

As part of the Ethiopian accounting system reform program various actors participated in
the evaluation of the Ethiopian accounting and auditing practices, drafting of the legal
and financial reporting proclamations; discussing the regulation of the accountancy and
audit practices and professional body issues for the last two decades (Mihret and Bobe,
2014). In 1999, a government project was conducted by Ethiopian experts from various
institutions to evaluate and validate the study report and conclusions made by Coopers
and Lybrand, a UK based consultant, on the national and audit development program of
Ethiopia (ENAADP, 1999). Following certain years of delay for which the reasons are
not clearly known for justification; another study was conducted in 2007 by the World
Bank in coordination with concerned Ethiopian stakeholders. The World Bank team
evaluated the Ethiopian accounting and auditing practices and institutions underpinning
the accounting and auditing practices in the corporate sector and finally came up with
findings and policy recommendations. The findings of the World Bank report indicate
the existing gaps in the Ethiopian accounting and auditing practices, the financial
reporting infrastructures and legal frameworks. Accordingly, as part of the World’s move
towards financial reporting harmonization and global economic integration, and the
improvement of the Ethiopian accounting and auditing practices, the World Bank
provided policy recommendations to reconstruct the financial reporting and regulatory
landscape in a way that is suitable to the adoption of IFRS and ISA. Specifically, the
ROSC team recommended the issuance of the financial reporting proclamation and
regulation as antecedents to IFRS adoption and as steps for the improvement of the
Ethiopian financial reporting infrastructure and legal frameworks which would be
important pillars for the adoption of IFRS in the Ethiopian economic environment
whereby Ethiopia will have better financial reporting system that supports its economic
activities. Accordingly, Ethiopia has embarked on adopting IFRS by issuing proclamation
No.847/2014 for financial reporting and regulation No. 332/2014 “for the establishment
and determination of the procedure of the accounting and auditing board of Ethiopia”.
Ethiopia as a developing country is expected to have gaps in its accounting system and
related underpinning institutions as this has been supported by literatures from other

4
countries experience and the World Bank report (ROSC, 2007).The gaps indicated in this
report are in the basic antecedents or preconditions of IFRS adoption. The policy
recommendations provided by the World Bank are preconditions that are required to be
implemented to institutionalize the Ethiopian financial reporting infrastructures and set
up the regulatory frameworks in the context of IFRS adoption to integrate Ethiopia into
the global economic system.

Despite of the fact that Ethiopia has significant gaps in its financial reporting
infrastructures and legal frameworks which are basic preconditions of IFRS adoption, the
Ethiopian IFRS adoption agenda has come to effect with the issuance of the financial
reporting proclamation and regulation and the establishment of the board which is in
charge of coordinating the implementation of IFRS and regulating the financial reporting
practices of the country.

Despite the fact that some organizations have been declared to have adopted IFRS under
the regulations of the NBE and Ethiopian Commodity Exchange directives (Tesfu, 2012;
Joshi et al.2014), the adoption of IFRS and its effect in the Ethiopian accounting system
and business environment is not yet significantly materialized. Tesfu (2012) and Joshi et
al. (2014) have tried to study some of the challenges, benefits and IFRS adoption
processes with reference to the institutions which were declared as IFRS adopted entities
by NBE and ECX directives. However, these studies did not touch any aspects of the
IFRS adoption project which led to the establishment of the Ethiopian financial reporting
and regulatory set up that mandated the official adoption of IFRS at the country level.
The official adoption of IFRS in Ethiopia is a very recent phenomenon which can be
traced to the issuance of the financial reporting proclamation and the regulation for the
establishment of the AABE, a regulating organ of the country’s financial reporting
system. The implementation and compliance of IFRS by reporting entities is yet to be
expected from now onwards.

Currently, the IFRS adoption in Ethiopia, basically, being in its beginning stage is
expected to have various issues to be studied and clarified based on international best
practices and literatures. Hence, the IFRS adoption processes, rationales and debates for
IFRS adoption in Ethiopia, implications and the way forward issues are some of the

5
untapped potential research areas that need to be clarified and articulated based on
empirical evidences. Having said so far, the researcher aims to explore the overall IFRS
adoption processes in Ethiopia with a particular focus on the IFRS adoption project,
related issues and implications in reference to literatures, international best practices and
Ethiopian contextual factors and in turn provide recommendations and insight potential
research areas for further study.

1.3 Objective of the Study

The general objective of this study is to critically assess or explore the overall IFRS
adoption process in Ethiopia, related issues and implications.

The following specific objectives were formulated to contribute to the achievement of the
main objective:
• To highlight and articulate the Ethiopian IFRS adoption process rhetoric;
• To examine the deliberations in the IFRS adoption process in Ethiopia with a
particular focus on the IFRS adoption project;
• To explore the progress of IFRS adoption process in Ethiopia;
• To identify the stakeholders involved in the Ethiopian IFRS adoption process and
their roles as well as interests; and
• To identify the phases and components of IFRS adoption process in Ethiopia.
Research Question

The following research question and sub-questions guide the study:

RQ: How did the IFRS adoption agenda materialize and translate into practice in Ethiopia
in the apparent absence of preconditions or antecedents of IFRS- based financial
reporting?

Sub research questions:

1. What were the rationales of IFRS adoption in Ethiopia articulated in the absence of
preconditions for IFRS adoption?

6
 2. What were the deliberations surrounding debates for and against the decision for
IFRS adoption in Ethiopia?
3. How progressive is the IFRS adoption project in Ethiopia (the current status of IFRS
adoption in Ethiopia and its implications?)

1.4 Significance of the Study

The adoption of IFRS is a global phenomenon that Ethiopia has already embarked on to
improve its financial reporting system supported by this global governance technology.
Ethiopia as a developing country requires a strong financial reporting system that
enhances corporate accountability and governance. As part of the initiatives taken to
improve the Ethiopian financial reporting environment, the adoption of IFRS could be an
important strategic choice for Ethiopia to gain international best experiences in the areas
of financial reporting and related issues and in turn fulfill requirements for accession to
foreign financing and attraction of FDI to the Ethiopian macro-economic environment.

Hence, this study would expect to insight potential issues relevant to the adoption of
IFRS in Ethiopia and its implications. It would also insight potential research areas on
the adoption of IFRS and related issues for future research that would help develop
Ethiopian literature in the areas of financial reporting and related issues and in turn
contribute for the development of the accounting profession and its practices in the
country. Given the current Ethiopian financial infrastructure and legal frameworks,
highlighting potential research areas is certainly an important contribution thereby
interested and potential professional researchers will have reference point of motivation
for conducting research on the effects of IFRS implementation in the Ethiopian business
environments. Furthermore, this study highlights the implications, challenges and
possible solutions of IFRS implementation in Ethiopia based on international best
practices and literatures thereby the effective implementation of IFRS and its expected
result could be materialized.

The results of this study are expected to initiate further debate and research in the
Ethiopian context and other countries with similar contexts to extend theorized
understanding of this new rising global financial architecture.

7
1.5 Scope of the Study

The study covered the process of IFRS adoption in Ethiopia conducted over two decades
since the early 1990s to the present time, Dec 2015. It covered the overall IFRS adoption
processes in Ethiopia with the traces of inscriptions, i.e., points of reference, relating to
Ethiopian accountancy development projects that led to the IFRS adoption in Ethiopia
during 2014. To explain the IFRS adoption translation processes undertaken over the
years, the researcher conducted in depth interview with major participants in the IFRS
adoption project and reviewed document evidences produced in the translation process
that transformed the Ethiopian accounting system to a new financial reporting and
regulatory framework in the context of IFRS adoption. Besides, the researcher tried to
contextualize the Ethiopian IFRS adoption practices based on reviewed literatures from
other countries experience.

1.6 Limitation of the Study

This study is basically limited to assess the overall IFRS adoption process in Ethiopia
before its implementation. It intended to articulate how the Ethiopian IFRS adoption
agenda was originated and translated into practice in the Ethiopian context. It does not
show the practical effects of IFRS implementation in the Ethiopian business environment
as the effects are expected to occur in the years to come upon implementation. It is partly
based on the perspectives of IFRS reflected by the interview participants and the
deliberations of the study subject. The study is based on qualitative interpretation of the
IFRS adoption processes to Ethiopian context and the IFRS rhetoric based on literatures.
Qualitative interpretation of the study by its very nature could be subject to interpretation
by readers into a different context depending on one’s interests and backgrounds.
However, this study is conducted based on existing literatures on IFRS adoption rhetoric
and deliberations. Hence, the interpretations of this study and its conclusion should be
understood and interpreted by readers objectively and professionally in the context of the
existing and rising IFRS rhetoric.

8
1.7 Motivations of IFRS Adoption in Ethiopia and Study Setting

Since the beginning of the early 1990s, the Ethiopian Government has been undertaking
economic reforms (Mihret and Bobe, 2014) to induce private sector and foreign direct
investment to the Ethiopian economy. In line with these reforms and the effect of
globalization, Ethiopia has attracted foreign investors for the last two decades. Consistent
with the founding rationale of IFRS, foreign companies operating in Ethiopia require
IFRS financial reporting infrastructure to produce quality and comparable financial
reports. As per the AABE draft structure and operating document dated Feb 2010, strong,
transparent and understandable financial reporting by corporate entities in the public and
private sectors will contribute to the development of Ethiopian economy in various ways.
These include: contribution to financial sector development, availability of useful
financial information for decision making in the capital market, facilitation of access to
international source of financing for corporate sectors; attraction of foreign direct
investment, improvement of tax revenue collections from the private sector, enhancing
transparency of the decentralized financial structures of the Ethiopian Government,
providing quality financial information to facilitate investment decisions and good
corporate governance, assisting the Ethiopian universities and colleges and other training
institutions to make their accounting audit syllabus more relevant to the public and
private sectors, improving availability of reliable corporate financial information for
supporting various other building blocks of the economy, reducing the risk of financial
crises and corporate failures and related adverse economic impacts. These perceived
rationales are articulated in the Ethiopian IFRS adoption inscriptions by the actor-
networks in consistent with the global founding rationale of IFRS to produce quality
financial information.

In light of the importance of strong financial reporting infrastructure to the socio-

economic development of the country, a lot of efforts have been made to establish the
required regulatory and institutional frameworks supporting the development and
strengthening of the financial reporting systems of Ethiopia. In view of this, the World
Bank ROSC team in coordination with Ethiopian stakeholders evaluated the strengths
and weaknesses of the Ethiopian financial reporting infrastructure and identified the gaps

9
existing in the Ethiopian accounting system and related institutional and regulatory
environments (ROSC,2007). Based on the gaps identified, the World Bank provided
policy recommendations that would help improve the Ethiopian financial reporting
cognition infrastructure and in turn facilitate the implementation of IFRS which is
expected to provide quality financial information required to support the economy.
According to (ROSC, 2007), Ethiopia does not have its own national accounting
standards; the accounting and auditing practices are fragmented and are inconsistent
among organizations. Accordingly, the adoption of IFRS was recommended as a solution
for the improvement of the Ethiopian financial reporting environment coupled with
implications arising from globalization for implementing single set of financial reporting
system (IFRS) across the world following the expansion of transnational businesses. It is
believed by Ethiopian actors that the adoption of IFRS and ISA would help Ethiopia
access to foreign credit, attract FDI, establish stock market in the long term and access to
World Trade Organization membership. Currently, Ethiopian financial institutions
provide loans to borrowers based on collateral; hence, the adoption of IFRS is expected
to provide loan arrangements to companies based on financial reporting (quality and
reliability of financial reports).

Ethiopia is an ideal setting for such a study because its political-economy is largely state
managed under the government’s developmental state goals and revolutionary democratic
principles which often contradict the approaches of liberal democratic concepts that the
dominant globalizing forces advocate. Despite this variation, a new accounting regulatory
landscape which is designed based on the context of institutionalizing the IFRS
infrastructure has been established over the last two decades in a process that involved
interactions of local and transnational actors. Ethiopia’s accounting regulatory landscape
was diagnosed and suitably overhauled in this translation process. Improved financial
reporting environment supported by IFRS was viewed as a key Obligatory Passage Point
(OPP) for Ethiopia’s access to external finance and this in turn led to development of a
streamlined national accounting regulatory system through translation of institutions into
a framework suitable for IFRS-based financial reporting. This process generated
development of a national actor-network that tapped for resources to the global actor-
network through the mediating role of the Ethiopian government that promotes macro-

10
economic management rationales of enhanced financial reporting. The IFRS adoption
project served as an origin of the agenda to assess and develop the accounting regulatory
landscape in the country whereby legally sanctioned Accountants and Auditors Board of
Ethiopia (AABE) was established and fragmented professional accounting associations
were obligated to merge into a more authoritative Institute of Certified Public
Accountants of Ethiopian (ICPAE) established by law to operate under AABE. This
background enables to consider the socio-political and economic aspects of IFRS
adoption process to understand how actor-networks developed and made IFRS adoption
possible.

1.8 Structure of the Paper

This study is organized into five chapters. The first chapter presents the general
introduction of the study. The second chapter presents the literature review which sets the
theoretical foundation for the area of the study, IFRS and its adoption. The third chapter
states the research methodology and design. The fourth chapter deals with the analysis
and discussions of the study. The last chapter draws conclusions and implications of the
study and winds up the report by highlighting potential future research areas.

11
 Chapter Two

Literature Review

2.1. Introduction

In this chapter, a review of related literature about International Financial Reporting

Standards (IFRS) and issues relating to the adoption of IFRS are presented. The literature
review consists of the general overview and history of IFRS, the adoption process of
IFRS from other countries experiences, rationales and debates of IFRS adoption, the
perceived benefits and challenges of IFRS adoption, concepts of the analytical
framework; Actor-Network Theory, the preconditions of IFRS adoption with empirical
evidences from other countries experience and research gap .

2.2. Overview of Internationalization of Accounting Standards

Various attempts have been made to reduce accounting differences across countries,
because of the problems associated with worldwide accounting diversity. The ultimate
goal of reducing accounting diversity is to have all companies around the world follow
one set of international accounting standards (Hoyle. et al., 2009, Baker et al., 2009).
With growing international markets and international investment opportunities, the
advantages of uniform worldwide accounting standards as a global language of financial
information have become more and more apparent (Apostolos, 2010). The convergence
of accounting standards in the global environment has got much attention in the academic
and professional accounting literature (Prather-Kinsey, 2006). The main objective of
reducing accounting diversity through convergence is to ensure that all companies across
the globe follow a single set of accounting standards with the increased globalization in
the international markets, international trade, cross border financial transactions and
investment opportunities. This led to the adoption of IFRS as a basis for preparing,
disclosing and presenting accounting reports across national boundaries. However,
despite the advantages of convergence of accounting standards, there are arguments for
and against the adoption of the IFRS by different scholars; some scholars argue for
advantage of adopting the international accounting reporting standards while others argue

12
against the adoption of the standards.(Barth, 2007;cited in Baba, 2013) argued for the
adoption of IFRS by reasoning out that single set of internationally accepted accounting
standards is expected to reduce the cost of processing financial information and auditing
to users of capital markets, increase uniformity and comparability of financial statements
across companies operating in different national boundaries thereby ease investment
analyses activities and facilitate easy access to foreign investments (FDI) and
liberalization of capital markets. Likewise, Hail, Leuz and Wysocki(2010) pointed out
that the adoption of IFRS would be relevant in reducing cost of capital, allocating capital
and providing greater market liquidity. They further argued that convergence to IFRS is
likely to have cost advantage in financial reporting in a way that multinational
companies will not need to report by using more than one set of accounting standards for
businesses operating in transnational environments .

On the contrary, the opponents of the adoption of IFRS pointed out that inconsistency in
the implementation of the standards and poor enforcement mechanisms may lower
financial reporting quality and lead to greater managerial discretion. They further argued
that adoption of IFRS is just one of the factors among several factors such as institutional,
legal and cultural that affects the quality of financial reporting across different national
boundaries (Jermakowicz & Gornik-Tomaszewski, 2006). Similarly, Sunder (2007)
argued that the adoption of IFRS across the globe may not adequately reflect regional
variations across countries; the adoption of IFRS may not adequately accommodate the
political and economic differences of countries.

In spite of the various arguments against global convergence to IFRS, definitely the
adoption of IFRS will reduce the cost of doing business across different national
boundaries by reducing the need for supplementary information, facilitating easy access
to global capital , increasing the practice of transparency and public accountability ,
enhancing the understanding and the ability to generate value strategic processes and
synergies and facilitating motivation and attraction of foreign investors (Baba,2013).
Accordingly, convergence to IFRS will help in maintaining credibility of financial
reporting and increase in efficiency in financial reporting (Obazee, 2008). Now, the
adoption of IFRS is a global phenomenon with numbers of countries in Europe,

13
Australia, Asia, Africa and others are adopting IFRS as a means for preparing their
financial reports. Accordingly, the adoption of IFRS across countries is considered as a
means of increasing cross border comparability, reporting transparency, increasing
capital flow, increasing capital market efficiency and minimizing information asymmetry
(Ball, 2006).

2.3 Historical Background of Internationalization of Accounting

Standards

The first move towards accounting standards convergence can be traced back to 1966
when the Accountants International Study Group (AISG) was proposed to be formed by
the professional accountancy bodies in Canada, the United Kingdom and the United
States in order to develop comparative studies of accounting and auditing practices.
Subsequently, the AISG was founded in 1967. After discussions and approval by the
three AISG countries and representatives of professional accountancy bodies in Australia,
France, Germany, Japan, Mexico and the Netherlands, the IASC was established in 1973
with the aim of issuing a single set of high quality and globally accepted International
Accounting Standards (IASs). Between the years 1973-2000, the IASC issued 41
International Accounting Standards (IASs). In 1997, Standing Interpretations Committee
(SIC) was established to consider continuous accounting issues. In 2001, the International
Accounting Standards Board (IASB) was established to replace IASC and subsequently
to take responsibility of issuing International Financial Reporting Standards (IFRS).
International Financial Reporting Standards are the key elements of economic reporting
infrastructures that provide standardized format for reporting economic gains and losses.
Since January 1, 2005, the European Union has mandated all listed companies in the
European Union to produce their financial statements in accordance with International
Financial Reporting Standards (IFRS). Subsequent to European Union regulation of the
adoption of IFRS in the listed companies of the EU member countries, the global
financial reporting system has been transformed significantly with unprecedented number
of countries and enterprises around the world adopting international financial reporting
standards as a basis for the preparation of financial statements (UNCTAD, 2008).

14
“The vision of global accounting standards has been publicly supported by many
international organizations, including the G20, World Bank, IMF, Basel Committee,
IOSCO and IFAC” (www. IFRS.ORG). In order to evaluate the progress towards the goal
of global accounting standards, the IFRS Foundation has been developing profiles of
application of IFRS around the world in individual jurisdictions .As per the IFRS
foundation jurisdiction profile update of November 9, 2015, currently profiles are
completed for about 140 jurisdictions including G20 jurisdictions regarding the
application of IFRS around the world.

2.4 Harmonization, Convergence and Adoption of IFRS

The concerns of harmonization of accounting standards and convergence with IFRS are
due to the globalization of capital markets. In fact, it is believed that accounting
harmonization is necessary for the globalization of capital markets (Quigley, 2007).
Investors now seek investment opportunities all over the world. Many business entities
continue to expand their operations across national borders. Companies are seeking
capital at the lowest cost anywhere. Securities markets are crossing national boundaries
(and increasing cross-border capital flow).There is need for transparency in company
reports so that investors, lenders and other users of financial information of companies
could compare their performance from one country to another. Also there is the need to
provide information that is relevant, reliable and understandable to meet the needs of
investors, for easy comparability of companies’ performance and the decision to buy,
hold or sell made easy through reduction or elimination of differences in accounting
policies and principles between countries.

The term harmonization means “the reconciliation of different accounting and financial
reporting systems by fitting them into common broad classifications, so that form
becomes standard while content retains significant differences” (Mathews & Perera,
1996, P. 322). Convergence means the process of converging or bringing together
international standards issued by IASB and existing standards issued by national standard
setters, with the aim of illuminating alternatives in accounting for economic transactions
and events. The ultimate objective of convergence is to achieve a single set of

15
internationally consistent, high quality global accounting standards, issued by IASB and
adopted by all the national standard setters (IASB, 2003).

Convergence is the process by which standard setters across the globe discuss accounting
issues drawing on their combined experiences in order to arrive at the most appropriate
solution.Obazee (2007) suggests that convergence could be either by adoption (a
complete replacement of national accounting standards with IASB’S standards) or by
adaptation (modification of IASB’s standards to suit peculiarities of local market and
economy without compromising the accounting standards and disclosure requirements of
the IASB’s standards and basis of conclusions).

2.5 Rationales and Debates of IFRS Adoption

The rapidly growing adoption of IFRS by numerous developing and emerging economies
has attracted significant research attention over the past few decades. Considerable
literatures explain this process as a response to existing demand for enhanced financial
reporting quality, comparability and uniformity (Ali, 2005).This functionalist explanation
of IFRS adoption by countries has been predominately associated with the effect of
globalization and the resulting interests to enhance the adopting countries’ access to
international capital markets. This rationale of IFRS adoption has a notion that
harmonization of international accounting standards would substantially contribute
towards facilitating the process of global economic integration by removing the barriers
to the cross border movement of goods, services and capital. This perspective of IFRS
adoption agenda relates to multi-national corporations with cross border stock exchange
listing and companies operating with transnational boundaries. This notion of IFRS
adoption agenda could be challenged as International Financial Reporting Standards are
also adopted by countries dominated by firms or listed companies with no overseas stock
exchange listings. While the adoption of IFRS is a manifestation of globalization
associated with ensuring the financial health of global capital markets through
transparent, comparable and consistent financial information, the developing nations have
no choice but to embrace the realities of globalization to participate in the globalized
economic wealth predominantly enjoyed by developed nations (Irvine and Lucas, 2006)
even though this premise could be forfeited with a notion that the adoption of the
16
globalized set of accounting standards could face challenges in realizing the expected
benefits in the context of the developing countries’ culture and socio-economic realities.

Irvine and Lucas (2006) argued with notions that the accounting profession in developing
countries is not developed to the point where it can regulate the profession and financial
reporting practices effectively in a way that it supports the implementation of IFRS in
those jurisdictions even though the level of accounting professionalism and its
contribution to the effective implementation of IFRS could vary in developing nations
depending on their level of development. Similarly, it is argued that the regulatory
infrastructure of developing countries may not provide the necessary financial reporting
bases, which are implicit in the IFRS adoption and implementation frameworks (Irvine
and Lucas, 2006). This argument could illustrate the low level of accountancy
professionalism and financial regulatory system existing in Ethiopian Economic
environment referring to the requirements of the globalized financial reporting
infrastructure (IFRS) as it was indicated by the World Bank report (ROSC, 2007).

Zori(2015) argues that the economic rationale of accounting standardization

overemphasizes the benefits of adopting standards in contrast to the institutional
perspective that considers the important institutions that must be in place to support the
adoption and implementation of the standards to realize the expected economic benefits.
This argument illustrates the lack of the necessary institutional arrangements in many of
the African countries and presumes that the institutional arrangements like the presence
of capital markets and general level of economic development play a critical role in the
decision of institutionalizing and adopting IFRS in African countries. This notion
expounds the complementary effect of institutional arrangements and associated roles and
interests of actors which shape the outcome of the IFRS adoption decision in addition to
the economic rationale of adopting the standard.

As finance providers of private firms tend not to rely of financial reporting because they
are often directly involved in management of the firm (Ball and Shivakumar, 2005),
developing countries’ economies that are characterized by privately-held organizations,
would exhibit little urgency for IFRS adoption. An alternative explanation is provided in
another stream of IFRS literature that poses a critical argument that the IFRS agenda has

17
political-economic origins associated with the globalizing financial architecture (Perry
and Nölke, 2006) originating from the financial reporting needs of multi-national
companies. The need for global governance technologies such as the IFRS1 is particularly
evident given that transnational investment grew three times faster than trade between the
1980s and 1990s (Benería, 1995). Similarly, transnational corporations increased their
foreign direct investment by 15% per year in the 1990s, which stood at US$974 billion in
2005(Manfred, 2003, p. 50).

Research on the accounting profession and its regulatory practices is important for
understanding modern society more generally (Cooper & Robson, 2006, pp. 415-416).
Consistent calls for research have been made on the link between the accounting
profession and political-economic context (Chua and Poullaos, 1993; Ezzamel and Xiao,
2015). Nevertheless, the literature in this area remains parsing and is mainly concentrated
on the developed world. Developing and emerging economics contexts are neglected in
the accounting professionalization literature (Carmona and Zan, 2002) despite the
continuing integration of these contexts to the emerging global financial architecture
(Arnold, 2009; Humphrey et al., 2009).

Development of the global economic order over the last three decades under the
leadership of supranational institutions, namely, the IMF, the World Bank and the World
Trade Organization (Manfred, 2003) and the set of global regulatory technologies could
be taken as a driving force behind the increasing adoption of IFRS both in market-centric
and non-market-centric economies. This trend of external push for IFRS adoption in
developing countries often interacts with the countries’ needs for IFRS adoption as a
mechanism of access to the global financial market although this possible common
interest between the global forces and national actors cannot be regarded as free of
tension. The state plays a key role in managing the national-transnational tension to
ensure the internationalization benefits to national economies (Jessop, 1994) and it
mediates the global move for IFRS adoption with actors that advocate the benefits of
IFRS for the national economy while preserving national interests. The state finds its

1
Nearly all the MNCs originate from North America, Europe or the Asian region Manfred, B.S., 2003.
Globalization: A very short introduction: Oxford University Press, Oxford, New York..

18
active involvement in the development of transnational institutions—including IFIs—
necessary because multi-national corporations (MNCs) operating within such
transnational frameworks are not subject to democratic modes of accountability within
the boundaries of individual jurisdictions (Jessop, 1994).

International actors advocating international harmonization of financial reporting through

IFRS adoption and national actors seeking integration with the global financial
architecture interact in various ways. However, this complex interaction remains to be
adequately understood and theorized. By drawing on Actor Network Theory (ANT), this
paper theorizes IFRS adoption as a product of a series of translations in the context of
interactions between globalizing forces and Ethiopia’s effort to integrate into the global
economic system.

2.6 Benefits of IFRS Adoption

It is advocated that adoption of IFRS will lead to greater transparency and

understandability, lower cost of capital to companies and higher share prices ( due to
greater confidence of investors and transparent information), reduced national standard
setting costs, ease of regulation of security markets , easier comparability of financial
data across borders and investment opportunities , increased credibility of domestic
markets to foreign capital providers and potentials to foreign merger partners. It will also
facilitate easier international mobility of professional staffs across national boundaries
(Odia,J.O & Ogiedu,K.O,2013).

Armstrong et al. (2007) found that investors expected net benefits to IFRS adoption in
Europe associated with increases in information quality, deceases in information
asymmetry, more rigorous enforcement of the standards and convergence.

Gordon (2008) listed the benefits from adaptation of IFRS in the world as: better
financial information for shareholders and regulators, enhanced comparability, improved
transparency of results, increased ability to secure cross border listing, better
management of global operations and decreased cost of capital in the world.

According to Ball (2006), IFRS has direct and indirect benefits to investors.

19
The direct benefits to investors include the following:

1. IFRS provides more accurate, comprehensive and timely financial statement

information for public financial reporting in most of the IFRS adopted
countries when compared to the national standards they replace.

2. Improving financial reporting quality allows small investors to compete

better with professionals, and hence reduces the risk they are trading with a
better informed professional (‘adverse selection’).

3. By eliminating many of the international differences in accounting

standards, IFRS eliminates many of the adjustments which have been made
historically by analysts in order to make the companies’ financial reports
more comparable internationally. And hence, IFRS adoption could reduce the
costs of financial information processing to investors.

4. Reduction in the financial information processing cost increases market

efficiency.

5. Reducing international differences in accounting standards contributes to

some degree in removing barriers to cross boarder acquisitions and
divestures.

Generally, IFRS provides increased comparability and hence reduced

information costs and information risk to investors (Ball, 2006).

The indirect benefits of IFRS adoption include the following:

According to Ball (2006), IFRSs offer several indirect advantages to investors. Since
higher information quality should reduce both the risk to all investors from owning shares
and the risk to less informed investors due to adverse selection, in theory it should lead to
a reduction in firm’s costs of equity capital. This would increase share prices and in turn
makes new investments attractive to investors other factors remaining constant. Indirect
IFRS advantages to investors arise from improvement in the usefulness of financial

20
statement information in contracting between firms and a variety of stakeholders, notably
lenders and managers (Watts, 1977; Watts and Zimmerman, 1986).

According to UNCTAD, several developing countries and countries with economies in

transition strive to mobilize financial resources from domestic and international sources
to achieve their social and development goals. Hence, the availability of relevant
information on potential investment targets has an impact on efforts to mobilize
investment for financing economic and social development; such information plays an
important role to make investment decisions and conduct risk assessment (UNCTAD,
2008). Companies which provide potential investors with reliable and comparable
financial statements are more likely to attract domestic and international investment.

2.7 Challenges of IFRS Adoption

The adoption of IFRS is not an easy task due to the fact that several challenges could be
faced in the way of its implementation. The challenges of IFRS adoption are common
to countries across the world even though there some unique challenges that are specific
to a particular country depending on its contexts (Robyn & Graeme, 2009; cited in Baba,
2013) .The main inhibiting factors in the adoption process of IFRS in Europe, America
and the rest of the world are not necessarily technical but cultural issues, mental models,
legal impediments, educational needs and political influences (Obazee, 2007; cited in
Odia & Ogiedu, 2013). According to Baba (2013), among others, the challenges of IFRS
adoption include the regulatory requirements to amend the existing tax laws of a country
in line with the requirements of new standards, level of education and experience, level of
awareness, inadequate technical capacity, implementation costs, weak enforcement and
compliance mechanisms.

According to Rong-Ruey Duh (2006); cited in Odia & Ogiedu (2013), the challenges
affecting the IFRS implementation include: the timely interpretation of standards,
continuous amendment to IFRS, accounting knowledge and expertise possessed by
financial statement users, preparers, auditors and regulators and managerial incentive.

Although IFRS has the potentials to facilitate cross border comparability, increase
reporting transparency, decease information costs, reduce information asymmetry and
21
thereby increase the liquidity, competition and efficiency of markets (Ball 2006, Choi &
Meek 2005), Armstrong et al.(2007) and Soderstrom & Sun (2007) have found that
cultural, political and business differences may also continue to impose significant
obstacles in the progress towards a single global financial communication system because
a single set of accounting standards cannot reflect the differences in national business
practices arising from differences in business institutions and cultures.

2.8 Actor-Network Theory: Concepts and Analytical Frameworks

Actor-Network-theory (ANT), also known as enrolment theory or the sociology of

translation emerged during the mid-1980s, was originally developed by Science and
Technology Studies (STS) scholars Michel Callon (Callon,1986),Bruno Latour
(Latour,1996),and the sociologist John Law(Law, 1992) as an attempt to understand the
process and knowledge creation in science and technology .The theory is an increasingly,
influential but still deeply contested in its approach to understand the humans and their
interactions with inanimate objects (cresswell, Worth et al.2010).

Actor–network theory examines the motivations and actions of actors who form
elements, linked by associations, of heterogeneous networks of aligned interests
(Walsham & Sahay, 1999).

While with the lens of the ANT, networks are materially heterogeneous and an actor-
network contains not merely people but non-human entities such as technology and
organizations, which are collectively referred to as “actors”. In such a sense, ANT is also
described as a “material-semiotic” method, which maps relations that are simultaneously
material (between things) and semiotic (between concepts).

Translation: Translation is a process of aligning different interests, claims, ideas and

intentions of different actors. Actor-network assumes that social structure is not a noun, but a
verb (Law, 1992).
Callon (1986) explains four moments of translation, namely, problematization, interessement,
enrollment and mobilization outlined below:
Problematization: Problematization refers to the actors’ efforts to convince others to
subscribe to their own view by showing that they have the correct solutions for the problems
22
which are defined (Levant.y, Berland.N, & Alcouffe.S, 2008).
The problematization answers the question of how to become indispensable. It describes a
system of alliances, or associations, between entities, thereby defining the identity and what
each one wants. The definition of the actors brings the most relevant stakeholders into the
story. These actors cannot reach their goals by themselves due to their respective obstacles;
therefore, they need to align their interests with the other actors through cooperation. The
primary actor establishes itself as an Obligatory Passage Point (OPP) between the other actors
and the network, which makes it indispensable. Problematization is the first moment of
translation during which a focal actor defines identities and interests of other actors that are
consistent with its own interests, and establishes itself as an obligatory passage point (OPP),
thus “rendering itself indispensable”(callon,1986). The obligatory passage point broadly refers
to a situation that has to occur in order for all the actors to satisfy the interests that have been
attributed to them by the focal actor. The focal actor defines the OPP through which the other
actors must pass through and by which the focal actor becomes indispensable.
Problematization indicates the most important actors both human and non-human and defines
the problems so that other actors recognize them as their own problems.

Interessement: Interessement corresponds to the construction of the interface between the

interests of the various stakeholders and to the strengthening of links between these various
interests (Levant.y, Berland.N, & Alcouffe.S, 2008).The interessement answers how the allies
are locked in to place. Interessement is a series of processes by which actors seek to lock other
actors in to the roles proposed for them in a certain program. It involves obtaining the actors’
interests and negotiating the terms of their involvement. It is the second moment of translation
which involves a process of convincing other actors to accept definition of the focal actor
(Callon, 1986). The primary actor works to convince the other actors that the roles it has
defined for them are acceptable.

Enrollment: Enrolment is the creation of alliance networks, the aim of which is to build up
agreement among the stakeholders concerning their interests (Levant.y, Berland.N, &
Alcouffe.S, 2008 .It is the moment of translation that actors accept the interests defined by the
focal actor in the context of adopting new ideas and practices. The enrolment answers the
question of how to define and coordinate the roles. It is a set of strategies in which the prime

23
actors seek to define and interrelate the various roles which are allocated to others.

Mobilization: Mobilization refers to the monitoring of the various interests so that they
remain more or less stable (Levant.y, Berland.N, & Alcouffe.S, 2008).

The mobilization of allies answers the question; “do the delegate actors in the network
adequately represent the masses? Who speaks in the name of whom? Who represents whom?”
These crucial questions must be answered if the project led by the researchers is to succeed
(Callon, 1986). Mobilization is a set of methods used by the prime actors to ensure that
supposed spokesmen for various relevant collectivities are able to represent those collectivities
and not betray them. Using the notion of spokesman for all the actors involved at different
stages of the process of representation does not represent any problem. To speak for others is
to first silence those in terms their interests. It is certainly very difficult to silence human
beings in a definitive manner but it is more difficult to speak in the name of entities that do not
possess an articulated language: this supposes the need for continuous adjustments and
devices of interessement that are infinitely more sophisticated (Call, 1986).

These moments constitute the different phases of a general process of translation, during
which the identity of actors, the possibility of interaction, and the margins of maneuver are
negotiated and delimited.

This study employs Actor-Network theory (ANT) theory to explain how a network of
national (Ethiopian actors) and international actors enabled the development of the
Ethiopian accounting regulatory framework, a milestone for the adoption of IFRS in the
Ethiopian economic environment. This approach enables investigating the role and
interactions of the state, other national actors, and the international actors in the
institutionalization of the IFRS infrastructure in Ethiopia. The actor- network theory
grounded on the notion that ideas and practices adopted in network building involving
humans (actors) and non-humans (actants) (Ezzamel& Xiao, 2015). For this study, the
non- human actors include the accounting regulations; infrastructures upon which the
roles and interactions of actors are reflected to construct networks that finally led to the
establishment of the financial regulatory system, a milestone for the IFRS adoption in
Ethiopia.ANT concerns on networks, translations and inscriptions as central elements in

24
the process of building alliances on the way to adopting ideas and practices. Inscriptions
(scripts, diagrams, charts etc.) are the means by which the moments of the translation
process are performed, networks formalized and recorded in a way that they provide
records for members of network and their target audience and provide means of forming
alliances and bonding heterogeneous members together.

ANT enables understanding the process of translation that takes place upon adoption of
new ideas and practices (Cooper et al., 2012; Ezzamel and Xiao, 2015). A key notion of
this theory is that inherent functional characteristics of practices are not necessarily the
driving force for adopting the new organizational practices and that such processes could
originate for actors’ interests and be influenced by social and technical factors that
strengthen or weaken the actor-network (Cooper et al., 2012). ANT’s key underpinning
concept of translation is crucial for the understanding of this process of modification
(Latour and Porter, 1996). Translation involves a “transformation” that enables “actors…
to hold together the bits and pieces out of which they are composed… and prevent those
pieces from following their own inclinations” (Law, 1992, p. 86) to make sure that the
established network attends to the interests of actors. Thus, translation contrasts with the
diffusion model of adoption, which ascribes inertia that leads to adoption of the idea in its
whole. Actors shape the adoption to suit their needs and interests (Latour, 1986) in the
translation process that configures actors relationally in the construction of networks
(Callon et al., 1983; Mihret et al., 2014).

The ANT approach requires identification of actors involved in the process of actor-
network construction and their strategies to establish networks with other actors. In the
ANT approach, “social relations, including power and organization, [are treated as]
network effects” (Law, 1992, p. 86). Technologies make “action at distance” possible in
the management (Armstrong, 1994) of organizations by presenting distant reality in
stable, movable and combinable form (Robson, 1992) such as financial reports. The
presence of distance necessitates the use of technologies to make possible the taking of
control action on distant sites (Latour, 1978, p. 222). Distance generates the problem of
control and overcoming this problem necessitates the use of technologies of translation
(Robson, 1992). Latour (1978, p. 223) argues that acting at a distance becomes possible

25
by inventing means that: (a) render [the objects of control] mobile so that they can be
brought back [to the center]; (b) keep them stable so that they can be moved back and
forth without additional distortion, corruption or decay; and (c) [make them] combinable
so that whatever stuff they are made of, they can be cumulated, aggregated, or shuffled
like a pack of cards’ [emphasis added]. Through these features, technologies enable the
‘center’ to take action on distant sites by virtue of the knowability rendered by the use of
vocabularies that technologies provide (Armstrong, 1994; Mihret et al., 2014). The use of
the IFRS can enable MNCs to aggregate financial information from subsidiaries
operating in different jurisdictions and monitor their performance using IFRSs as
inscription to benchmark quality of financial reports (Mihret and Grant, 2015).

Callon (1986) organizes a model of analysis for the process of translation that occurs
upon adoption of a new technology, which this study adopt to explain the IFRS adoption
process in Ethiopia. It comprises four distinctive phases: problematisation,
interessement, enrolment and mobilization. Focal actors conduct problematisation
through definition of a problem or an issue that confronts other actors in a manner that
foreshadows a resolution that makes that focal actor indispensable (Ezzamel and Xiao,
2015). The proposed solution in the problematization stage involves translation, of the
problem in terms of the solution and presenting actors involved in the adoption process as
indispensable for the operationalization of the proposed solution (Bloomfield and Best,
1992). Since each actor reacts to the proposal for adoption of a new idea in different ways
including resistance (Latour, 1996), actors employ strategies to forge alliances with other
actors through negotiations that could lead to re-definitions of the problematization
(Ezzamel and Xiao, 2015; Grint and Woolgar, 2013). In the interessement phase, further
translation of the framing takes place through identification and assignment of roles to
actors following the definition in the problematization stage (Callon, 1986), and this stage
mediates between the problematization and shared interests that actors are advancing
(Law, 1987). Inscriptions, such as standards, reports, “scripts, diagrams, charts, etc.”
serve to formalize key outcomes at various stages of the translation process by serving as
a common point of reference for actors (Cooper et al., 2012; Ezzamel and Xiao, 2015;
Mihret et al., 2014).

26
The enrolment stage involves establishing actors roles in the developing network (Callon,
1986) and this process could be effected through strategies such as coercion and
persuasion (Singleton and Michael, 1993)including the exercise of political authority
(Ezzamel and Xiao, 2015). The mobilization stage concerns acceptance of the new idea
by a greater number of actors (Callon, 1986; Grint and Woolgar, 2013) as the network
gains stability, i.e., where a state of punctuation is reached whereby the network operates
holistically. An actor-network could comprise a subset of smaller networks in it in which
case the investigation of an actor-network does not necessarily call for examining details
of each sub-component of the network. Such networks can be taken as black-boxes and
their roles in the actor-network considered as an individual actor (Mihret et al., 2014).
The study employs the below analytical framework to explain the IFRS adoption process
in Ethiopia in the context of actor-network construction involving national and
international actors while translating the Ethiopian accounting system into a new
reporting environment suitable for IFRS adoption.

27
Table 1: Translation process of the Ethiopian IFRS adoption process: Actor-network
Construction

Problematization &
Ethiopian Accounting System Interessement :

• Problem definition
with solutions
Study projects and Accounting • Identification of actors
reforms conducted by Ethiopia in and assignment of
consultation with international actors roles

• Convincing actors
Translation process: about the adoption of
IFRS in terms of OPP
By National and International Actors (Actor-
etc….
network construction)

Enrollment and
New Ethiopian accounting regulatory and Mobilization:
Reporting Framework & AABE Actor-network
establishment construction
involving more
enrollments of actors
IFRS Adoption mandated by the financial –IFRS adoption idea
reporting law is accepted by most
of the actors

Actor-network construction: National & (Stage of

international actors punctualization)

IFRS Implementation: Way forward

activities to be carried out by national actors
in consultation with international actors

28
2.9 Empirical Evidences: Lessons Learned from Other Countries’
Experience
2.9.1 Evidences from Case Studies
According to the case studies conducted by the United Nations covering Brazil,
Germany, India, Jamaica, Kenya, Pakistan, South Africa and Turkey, the factors that
initially contributed to the introduction of IFRS in the countries covered vary (UNCTAD,
2008).According to these case studies, in Brazil, the Central Bank’s intention of adopting
IFRS was to bring financial reporting in line with international best practice to facilitate
the comparability of financial reports and fostering investor confidence. In Germany, a
number of large companies began to prepare their financial statements in accordance with
IAS in order to be able to access financial markets outside Germany. In 1998, German
lawmakers gave listed companies the option of preparing their consolidated financial
statements in accordance with IAS. The implementation of IFRS for the preparation of
consolidated financial statements of listed companies in Germany became mandatory
following the decision of the European Union to implement the IAS regulation of 2002.
Since the case study of Germany illustrates, a European Union wide approach of
implementing IFRS, the implementation challenges extend beyond its domestic factors
(UNCTAD, 2008).

According to the case study of Kenya, the aim was to raise national financial reporting
requirements to international best practices following significant collapses in the
country’s financial services sector in the 1980s and 1990s. The case study of Kenya also
indicates the intention of the standard setting body to reallocate resources away from
setting national accounting standards to strengthening other activities aimed at more
effective implementation of international accounting and auditing standards (UNCTAD,
2008).

The case study of India indicated that the intention was to harmonize domestic financial
reporting requirements with international standards. The study also showed another
approach of converging Indian accounting standard with IAS by adapting the country’s
economic reality to IAS. The case study of Jamaica also indicated the intention of

29
harmonizing corporate reporting practices across countries in the Caribbean in
accordance with international requirements (UNCTAD, 2008).

The case studies of Pakistan, South Africa and Turkey showed that the intention was to
raise their financial reporting requirements to internationally recognized bench marks
(UNCTAD, 2008).

According to (UNCTAD, 2008) case study reports of the countries covered, a number of
practical challenges were faced by countries while implementing IFRS in their respective
jurisdictions.
These issues can be grouped in to three main areas:
A. Institutional
B. Enforcement
C. Technical
A. Institutional Issues: When IFRS are introduced in a given jurisdiction, they form part
of the preexisting laws and regulations in the country relating to the governance of
business entities. According to (UNCTAD, 2008) report, often, laws and regulations
overlap or become inconsistent, with each other especially when the roles and
responsibilities of different institutions are not clearly defined and coordination
mechanisms are not in place. Lack of coherence in the regulatory system becomes cause
for serious misunderstandings and inefficiency in the implementation of IFRS.

B. Enforcement Issues: Enforcement of standards is also one of the critical elements in

the implementation of IFRS. The full benefits of a global set of financial reporting
standards such IFRS will be realized only when these standards are consistently enforced.
The institutions responsible for enforcing IFRS need to realize that, as a result of the
growing globalization of financial markets, their enforcement efforts often protect both
domestic and international investors.

C. Technical Issues: Practical implementation of IFRS requires adequate technical

capacity among preparers, users and regulatory authorities. Countries implementing IFRS
face a variety of capacity related issues, depending on the approach they take. According
to (UNCTAD, 2008) report, the case studies showed a number of challenges in the

30
practical implementation of IFRS; one of the main difficulties encountered in the
practical implementation process was the shortage of accountants and auditors who are
technically competent in implementing IFRS and ISAs.

2.9.2 IFRS Adoption and Implementation: Korean Experience

A. Need for Education and Promotion

According to the Korean country report regarding IFRS adoption and implementation
(Dec 31, 2012), following IFRS adoption, there were great changes to the Korean
accounting system ever since the accounting system was put in place in Korea.

The IFRS adoption necessitated two notable changes: one is the transition to a “principle
based” platform and the other is the transition to disclosure and regulatory policies on a
consolidation basis. In response to these extrinsic changes, constituents had to change
their notion in order to follow the principle based IFRS instead of Korean GAAP which
was built on a rule based structure under which specific and detailed requirements were
set out. They were also required to change their minds to adjust themselves to a new
disclosure and regulatory paradigm, where consolidated financial statements are regarded
as the primary financial statements instead of Korean individual financial statements of
past Korean GAAP.

Believing that long term education and promotion would play an extremely important
role in bringing about these changes, Korea has carried out education and promotion
activities via diverse methods under a long term plan since the announcement of the
roadmap towards IFRS adoption in 2007. The successful implementation of IFRS in
Korea is considerably attributable to the fact that Korea emphasized education and
promotion of IFRS adoption.

B. Communication among Local and Foreign Constituents

The Korean practice indicated the importance of good communication among

constituents for effective implementation of IFRS. The communication was especially
important during the early periods of IFRS implementation. To facilitate such
communication, the Korean Accounting Standards Board (KASB) launched the “IFRS
31
implementation committee”, where various issues raised in practice were addressed and
thereby participants in the committee could arrive at a consensus through the cooperative
process of seeking solutions.

Communication with foreign constituents has also become important. Korea has put more
attention on communication with the IASB in the early phase of IFRS implementation.
These helped Korea understand more the perspectives of IFRS and its application.

C. Support from IFRS Foundation

Korea received support from the IFRS Foundation for implementing IFRS. The IFRS
foundation has contributed for the smooth progress of the IFRS implementation in Korea.
The Korean experience indicates that new IFRS-adopting countries should get support
from IFRS Foundation for smooth implementation of IFRS in their respective
jurisdictions.

D. Sufficient Preparation Period

Korean experience indicates that countries planning IFRS adoption need to have
sufficient preparation period and thorough plans preceding the IFRS implementation.

2.10 Conclusion and Research Gap

Following the rapidly growing adoption of IFRS by various jurisdictions around the
world, this globally rising financial reporting architecture has attracted significant
research attention for the last decades. The review of the literature shows various
deliberations and perspectives about the IFRS adoption and implementation practices
based on other countries’ experiences. It reflects some of the issues relating to the
debates, benefits and challenges of IFRS adoption by countries with varying legal,
cultural and socio-economic contexts. It highlights the preconditions of IFRS adoption to
be fulfilled by adopting jurisdictions in terms of technical, institutional and enforcement
issues.
Regarding the Ethiopian IFRS adoption, Tesfu (2012) and Joshi et al. (2014) have tried to
study some of the IFRS adoption process in Ethiopia referring to the financial sectors and
ECX member organizations which have been declared to have adopted IFRS. However,

32
this phenomenon is before the issuance of the Ethiopian financial reporting proclamation
which mandated IFRS adoption in Ethiopia in 2014. Ethiopia has been undertaking
various financial reforms and study projects to enhance its financial reporting
environment in line with IFRS.

However, no studies were conducted to assess such processes that led to the adoption of
IFRS in Ethiopia in 2014. Previous studies such as, Tesfu(2012) and Joshi et al.(2014)
did not indicate how the Ethiopian IFRS adoption agenda was originated, translated into
practice and mandated by legal framework in 2014 for official adoption. This implies that
there is knowledge gap in the Ethiopian context about the IFRS adoption processes and
its current status. Hence, this study aims to narrow the knowledge gap by putting point of
reference in terms of assessing the overall IFRS adoption processes leading to IFRS
adoption in 2014.

33
 Chapter Three

Research Design and Methodology

3.1 Research Design

This study followed an exploratory research design in order to explore knowledge or
information about the IFRS adoption process in Ethiopia which is a new and less explored
research area in the context of Ethiopia. An exploratory research design was employed to use
flexible strategies that could enable to develop better insights about the IFRS adoption process
in Ethiopia. The major emphasis in such a design (exploratory research approach) is on the
discovery of ideas and insights; it helps to apply flexible approaches and provides
opportunities to consider different aspects of a problem under study (Kothari, 1990).

3.2 Research Approach

A qualitative research approach was used to explore knowledge or information about the IFRS
adoption processes in Ethiopia, related issues and implications. The qualitative approach is
more flexible and provides more chance to go to deeper into the research questions. The
researcher conducted qualitative in-depth analysis of the IFRS adoption perspectives of
Ethiopia in reference to the literatures reviewed based on international best practices and the
Ethiopian accounting practices in context. This study was based on national case study
evidence on IFRS adoption project (processes) in Ethiopia conducted for the period 1991-
2015. The IFRS adotion project was studied beginning with the traces of inscrition
produced by focal actors during the period from 1991 to 2015. IFRS adoption rhetoric
does not necessarily conform to actual practices, the case study approach can enable us to
understand practices of individual countries ( Scapens,2004).Therefore, it is appropriate
to conceptualize the IFRS adoption in a defined context, which requires studying such
projects holistically and contextually – for which the case study method is suitable (Yin,
1981; Yin, 1994).This approach enables extending the current understanding of the IFRS
adoption with a view to contributing to the emerging theorization about the rise of IFRS
as a global governance technology. The choice of this research design using ANT enables
the researcher to incorporate the political, social and technical factors in the analytical
framework. The qualitative approach was used to explain the IFRS adoption process in
34
the context of the construction of actor-networks that made IFRS adoption possible in
Ethiopia. The Actor-Network-Theory (ANT) was employed to explain the roles and
interactions of the national and international actors in the institutionalization of the Ethiopian
accounting regulatory set up and infrastructures in a new form that is suitable to IFRS
adoption to the Ethiopian economic environment.

3.3 Selection of Interview Participants

Interview participants were drawn from stakeholders who participated directly in the IFRS
adoption process in Ethiopia. As per the Ministry of Finance and Economic Development
report dated March 2015, 36 institutions from various sectors have participated in the
Ethiopian pre-IFRS proclamation financial reform processes in various roles to come up with
the Ethiopian Financial Reporting Proclamation; a milestone for IFRS adoption to the
Ethiopian economic environment . Out of the actors participated, the researcher selected the
academia, Ministry of Finance and Economic Development, audit firms, Accounting
Professional Associations(IIA,ASE,EPAAA & AEA) ,NBE, chamber of commerce, ECX &
OFAG considering their significant roles in the Ethiopian financial reform processes leading
to IFRS adoption to the Ethiopian jurisdiction. Deliberate or purposive selection technique
was applied to select interviewees from each of the above institutions based on their
knowledge, involvement and role in the IFRS adoption process. The number of interviewees
was determined based on the sufficiency and quality of data collected (data collection until
saturation point; a situation at which all the possible and relevant data are considered to be
collected). The target interviewees include key persons involved in IFRS Adoption project:
technical committee members, members of accounting professional associations, academia,
auditors, AABE and other persons who were directly or indirectly involved in the Ethiopian
IFRS adoption processes including in the IFRS way forward activities.

3.4 Sources and Methods of Data Collection

The data used for this study were obtained from primary and secondary sources .The primary
data were collected through discussions and semi-structured in-depth interviews with
focused target interviewees whereas the secondary data were obtained from review of
documents (inscriptions) produced in the translation process that created the actor-

35
networks enabling the establishment of the Ethiopian accounting regulatory framework
within the context of IFRS based financial reporting infrastructure. The researcher chose
semi-structured interview because of its flexibility and he believes that it is more appropriate
to capture the ideas of the interviewee in a particular topic and it allows interviewees to go into
as much depth as they feel. Furthermore, the semi-structured interview allows the interviewer
to explore deeply and ask more questions that are not written down. The interview covers
the national actors involved in the financial reform process(IFRS adoption process) which
include interviewees such as, members of the accounting reform, members of the technical
committee for establishing Professional Accounting Body and National Accounting and
Auditing Board of Ethiopia(AABE), Technical Committee for Drafting Financial Reporting
Law of Ethiopia, Members of the AABE staffs, Members of sub-committees for validating the
draft Financial reporting law of Ethiopia, office of National Bank of Ethiopia, Ministry of
Finance and Economic Development, Members of the professional associations and members
of the academia. The participants’ deep knowledge and involvement in the IFRS adoption
project, accounting reform projects and roles in the way forward activities of IFRS
implementation were used as criteria to select the interviewees. Based on the interviewees’
permission, some of the interviews were audio-taped in order to preserve the originality
of the data and facilitate the data analysis. The researcher took hand-written notes for the
interviews which were not audio-taped. In order to conduct the interview, the researcher
designed interview check lists that guide the interviewees in a way that they can explain
their views to the interviewer based on their role as stakeholder of the accounting
profession, familiarity and involvement in the IFRS adoption processes. Furthermore, the
interviewer invited the interviewees for open explanation (briefing) regarding the IFRS
adoption processes in Ethiopia and related issues rather than focusing only in the issues
listed in the interview checklist. The researcher transcribed the interviews directly in the
English language for which the interviews were conducted both in Amharic and English.

The interviews were conducted by the researcher from September 2015 to December 2015 in
office premises of the interviewees. The interview times ranged approximately between 35
and 90minutes.

The interviewees were selected from audit firms, NBE, academia, MoFED and professional

36
associations. The interviewees selected are with high profiles having rich experiences in
accounting academic, auditing and accounting practices and are with senior and higher
positions of their respective professional roles.

Table 2: Interviewees profiles, roles, interview dates and duration

Interviewee Background Role in IFRS adoption Interview Interview
code process date duration
P1 Audit Director Stakeholder of the accounting 22 Sep 2015 20 minutes
profession and IFRS
implementation
P2 Senior Audit Stakeholder of the accounting 22 Sep 2015 40 minutes
Manager profession and IFRS
implementation
P3 Partner Stakeholder of the accounting 23 Sep 2015 60 Minutes
profession and IFRS
implementation
P4 Partner One of the technical 25 Sep 2015 100 minutes
committee members
P5 Government office Main actor in the IFRS 25 Sep 2015 60 minutes
/Practitioner implementation process
P6 practitioner Stakeholder of the accounting 02 Oct 2015 90 minutes
profession and IFRS
implementation
P7 Partner One of the technical committee 03 Oct 2015 60 minutes
members
P8 Practitioner one of the technical committee 19 Oct 2015 57 minutes
members
P9 Accounting one of the committee members 20 Oct 2015 60 minutes
Academic
P 10 Government One of the committee members 27 Oct 2015 60 minutes
office/Expert
P11 Government One of the actors in the pre- 28 Oct 2015 120 minutes
office/Higher IFRS projects
official
P 12 Manager Stakeholder of the accounting 28 Oct 2015 20 minutes
profession and IFRS
implementation
P13 Accounting Main actor in the IFRS 31 Oct 2015 30 minutes
Academic implementation process
P14 Government One of the technical committee 22 Dec 2015 75 minutes
office/Higher members and main actor in the
official IFRS implementation process

The secondary data include publications of the Ethiopian Accountancy, draft and final
financial reporting proclamations, draft constitution bye-laws of the professional body,

37
draft organization structure and scope of activities of the AABE, regulation for the
establishment and determination of the procedures of AABE, government policy
documents and inscriptions specifically relating to the IFRS adoption project, Evaluation
of National Accounting and Auditing Development Program document, AABE five years
IFRS implementation strategic plan document, publications relating to financial reform
projects, newspapers relating to IFRS adoption project, IFRS related conference reports,
minutes of IFRS adoption related meetings etc.
The interview data were integrated with the data collected through analysis of
publications of Ethiopian accountancy, government policy documents and inscriptions
specifically relating to the IFRS adoption project. The key inscriptions reviewed and
analysed include the following:
• The World Bank and IMF joint study ( ROSC, 2007);
• Evaluation of National Accounting & Auditing Development Program
(ENAADP, February, 1999);
• Minutes of the two Technical Committees;
• Terms of reference(ToR) to establish a National Accounting and Auditing Board;
• Summary discussions and decisions of the two sub-committee meetings;
• Draft AABE structure and operating bodies document(February, 2010);
• Comment reports on draft regulations of the Institute of Certified Public
Accountants (November 5-6, 2011);
• Draft constitution and bye-laws of the Institute of certified Public Accountants of
Ethiopia(ICPAE)(February, 2010);
• Ministry of Finance & Economic Development Report(MoFED) on the pre-
financial reporting proclamation processes (March ,2014);
• Technical committee reports on the organization structure and on the scope of
activities of AABE and constitution bye-laws of ICPAE;
• Technical committee reports on draft financial reporting proclamation of
Ethiopia;
• Draft financial reporting proclamation of Ethiopia;

38
 • Final financial reporting proclamation issued for IFRS adoption in the Federal
Negarit Gazette of the Federal Democratic Republic of Ethiopia( Proclamation
No.847/2014, a proclamation to provide for financial reporting ;
• Council of Ministers Regulation No. 332/2014, regulation to provide for the
establishment and to determine the procedure of the Accounting and Auditing
Board of Ethiopia; and
• AABE five years strategic plan on IFRS implementation etc.
The interview and document evidence data were interpreted and analysed for IFRS
adoption in Ethiopia as a process of actor-network building to incorporate Ethiopia into
the global economic arena over the past two decades within the broader context of the
globalizing institutional landscape.
3.5 Data Analysis and Interpretation
The data collected for this study were analyzed using qualitative approach. The interview and
document evidence data were interpreted and analysed to explain IFRS adoption process
in Ethiopia as a process of actor-network building in the context of institutionalizing the
Ethiopian accounting system into a new accounting regulatory set up to incorporate
Ethiopia into the global economic order. The researcher conducted a critical analysis and
interpretation of the interview data and review document evidences (inscriptions) to explain
the IFRS adoption process in Ethiopia for the last two decades. The interview data were
integrated with document evidences; the interpretations of the interview data were cross
validated with multiple data sources to explain the IFRS adoption processes, issues, debates
and rationales of IFRS adoption for Ethiopia contextually and within the broader context of
the globalizing economic and financial infrastructure. The reviewed literatures were integrated
with interview interpretations and analysis of document evidences to analyze and explain the
Ethiopian IFRS adoption processes and rationales contextually and within the broader view of
the adoption of the globalized economic infrastructure (IFRS).This study employs an Actor-
Network Theory approach to explain the role and interactions of the national and international
actors on the way to institutionalizing the Ethiopian financial reporting system through
formulating a new financial reporting regulatory system that finally materialized the issuance
of the financial reporting proclamation and regulations that laid the foundation for the
adoption of IFRS in Ethiopia. The study drawing on the ANT approach, bases on four basic
moments of the translation process which include probelmatization, interessement, enrolment

39
and mobilization to explain the IFRS adoption process in Ethiopia in the context of actor-
network construction involving the national and supranational actors.

Chapter Four

Discussions and Results

4.1 Introduction

This chapter consists of four sections. The first section presents analysis of evidence on
the accounting reforms and projects conducted in the Ethiopian accounting system
preceding to the probelmatization of the Ethiopian financial reporting environment and
translation into new accounting regulatory framework suitable to IFRS based reporting.
The second section presents an analysis of evidence on IFRS adoption process in
Ethiopia by providing an ANT explanation of how supranational and national actors
develop an actor network to institutionalize and translate the Ethiopian Accounting
system into IFRS based financial reporting environment. The third sections present
analysis of evidences on IFRS implementation and implications by reporting entities. The
final section presents the results of analyses and discussions.

4.2Accounting Reforms and pre-IFRS Framework Issues the Basis to

the Problematization for IFRS Adoption in Ethiopia

This section presents analysis of project studies, accounting and economic reforms
conducted in Ethiopia before the probelmatization of the Ethiopian accounting system
and regulatory environment as preceding initiatives taken to improve the Ethiopian
financial reporting and auditing infrastructures and in turn arrange conditions for IFRS
adoption.

The actor-network development process that enabled the establishment of new

accounting regulatory system leading to IFRS adoption in 2014 can be traced to the early
1990s .In line with the trends of globalization and as part of the initiatives to improve
the Ethiopian Economy , the Government of Ethiopian has taken various economic
policy reforms since the early 1990s (Peterson, 2001; Tesema, 2003; cited in Mihret &

40
Bobe,2014 ).The Ethiopian Government financial reform initiatives taken under civil
service reform program conducted during the 1990s could be worth mentioning to
articulate the Ethiopian efforts in the context of enhancing its financial systems (Peterson,
2001) and as part of the refom processes that preceded the current new Ethiopian
financial reporting and reguatory set up which was mandated in 2014 with Proclamation
No. 847/2014 and Regulation No. 332/2014. It was stated that the the current Ethiopian
financial reporting practices are the outcomes of the Ethiopian Governement civil service
reform pograms (MoFED report on pre-IFRS proclamation processes dated March
2015) initiated during the 1990s. Reforming the Ethiopian financial reporting
infrastructure and regulatory environment was one of the key priorities given by the
Government of Ethiopia to improve the Ethiopian financial reporting and auditing
practices in consistent with the globally accepted standards whereby Ethiopia will have
better financial system that ensures transparency, comparability and quality financial
information for good corporate governance and economic decisions. In light of this,
various projects have been conducted for the last two decades (1990s-2015) to reform the
Ethiopian accounting systems and regulatory environment to enhance the Ethiopian
financial reporting environment in the context of IFRS adoption. In 1997, a government
project funded by the British Overseas Development Agency (ODA) was conducted by
Coopers & Lybrand a UK based consultant to study ‘National Accounting and Audit
Development Program’(Mihret & Bobe,2014). In 1999, experts from various
stakeholders were organized to evaluate and validate the reports of this project for which
the assignment was made by the office of the Prime Minster of Ethiopia (NAADP
evaluation report, February 1999). Accordingly, experts from Ministry of Education,
AAU, Addis Ababa Commercial College, ECSC, OFAG, EPAAA, private firms and
Ministry of Finance evaluated the report of the project and recommended the
establishment of a National Board of Accountants and Auditors (AABE) (NAADP report,
FEB 1999, P97). Even though, the issues studied by NAADP team supplemented and
strengthened the subsequent studies such as ROSC study, the recommendations were not
implemented immediately as no focal actor followed the probelmatization of the
accounting system articulated so far by this study. The country has also initiated various
policy reforms championed by IFIs by providing technical and financial assistance to

41
meet the World Trade Organization (WTO) accession requirements (Mihret and Bobe,
2014).In another development, in view of modernizing the financial infrastructure of
Ethiopia, in 2005, the Ministry of Trade and Industry commissioned a World Bank
funded project to work out strategies for the development of accounting and auditing
standards. This study was led by the Office of the Federal Auditor General of Ethiopia
(OFAG) in collaboration with EPAAA and they contracted it out to the ACCA resulting
to a report called Ethiopian Accounting and Auditing Standards Development ‘’Road
Map” (ROSC 2007;Mihret & Bobe,2014).

A separate initiative was taken by Ethiopian Civil Service College (ECSC) to establish an
Institute of Certified Accountants and Auditors (ICAA) with a World Bank funding. The
ECSC under its institute (ICAA) initially aimed to develop accounting and auditing
standards to the public sector and provide professional certifications to public sector
accountants and auditors with a plan to be a professional institution in Ethiopia serving
both the private and public sectors in certifying and regulating the accountants and
auditors, and setting accounting and auditing standards. However, the ICAA did not
come into existence as an institute to carry out the above mentioned tasks as its missions
were integrated into the World Bank & IMF led financial reform project
recommendations aimed to enhance the Ethiopian accounting system (Mihret & Bobe,
2014; ROSC ,2007).

The last and the turning point for the establishment of the current new Ethiopian financial
reporting and regulatory landscape can be traced to the World Bank & IMF joint study of
the Ethiopian accounting and auditing practices (ROSC, 2007). It can be articulated that
this project has incorporated and promulgated the issues raised by preceding reform
projects about the Ethiopian accounting and regulatory system. Most interview
participants noted that the ROSC project has significant contribution for the origin of
IFRS adoption agenda to enhance the Ethiopian financial reporting environment through
IFRS infrastructures. As part of the global initiative to integrate the World in one single
set of financial reporting framework associated with economic integration and
cooperation across countries, the globalizing agents( IFIs) evaluated the Ethiopian
accounting and auditing practices in 2007 and came up with findings and corresponding

42
policy recommendations which trigger the Ethiopian initiative to take any necessary steps
to enhance the financial reporting and regulatory environment to the international
standard in the context of reconciling the perceived national interests and that of the
globalizing forces. In view of these rationales, the Government of Ethiopia has accepted
the policy recommendations provided by the IFIs and took any necessary steps to
implement the recommendations and realize the expected outcomes. Accordingly,
following the ROSC 2007 study, all the foregoing initiatives have been coordinated by
the Government of Ethiopia by establishing a national steering committee which is in
charge of coordinating and monitoring the implementation of ROSC recommendations to
construct the Ethiopian accounting and regulatory system within the framework of IFRS.
This is also substantiated by most of the interview participants. The current initiatives and
historical events are analyzed and substantiated by review of documents and interview
data in the next sections.

4.3 Institutionalization of the Ethiopian Accounting System with IFRS

based Infrastructure

4.3.1 Problematization and Interessement: A Series of Translations

leading to IFRS Adoption

This section presents the analysis of the translation process that articulates the
problematization of the Ethiopian accounting system and regulatory environment that laid
the foundation for the IFRS adoption agenda and how the IFRS adoption rationales are
articulated and shared among various actors.

The World Bank can be regarded as the focal actor that articulated the problematization
of the Ethiopian accounting system and regulatory infrastructure that led to the IFRS
adoption agenda in Ethiopia through the production of the ROSC report in 2007 as a key
inscription (The World Bank, 2007). The ROSC study was conducted to evaluate the
status of the Ethiopian accounting and auditing practices and supporting institutions and
regulatory frameworks. This project was studied from September 2007 to November
2007 led by IFIs and in consultation with various national actors including: Ministry of
Finance and Economic Development , Ministry of Capacity Building, Ministry of Trade

43
and Industry, Ministry of Justice, OFAG, Federal Inland Revenue Authority, NBE, Addis
Ababa Chamber of Commerce and sectoral associations, AAU,ECSC, EPAAA, ACCA-
Ethiopia ,audit firms ,banks , insurance companies, state-owned enterprises ,NGOs,
accountants, lawyers ,and academia. This is one of the major steps in the translation
process of IFRS adoption that reflects the interaction of IFIs, the state and other national
actors by establishing actor networks led by IFIs (World Bank & IMF) while
problematizing the existing Ethiopian accounting and related regulatory environment
aiming to improve the quality of financial reporting in the country by reconstructing the
existing accounting system to a new accounting and regulatory landscape within the
framework of IFRS based financial reporting. The study came up with findings and
provided policy recommendations aiming at improving the quality of financial reporting
in Ethiopia through IFRS infrastructure, which can be regarded as an obligatory passage
point (OPP) by which the interests of the national and international actors are mediated to
strengthen the actor-networks towards integrating Ethiopia with the globalized economic
infrastructure which is perceived to facilitate foreign financing and FDI to Ethiopia.

This OPP is the focal point that mediates the national actors and IFIs while building the
actor-networks in the translation process of IFRS adoption to the Ethiopian business
environment. In line with this rationale and by taking its authoritative responsibility, the
Government of Ethiopia took the initiative to manage and coordinate the resources while
building actor-networks towards the institutionalization of the Ethiopian accounting
system in a new form that is suitable to the IFRS based reporting. The translation of the
Western Accounting Regulation, IFRS can be regarded as a discursive field of accounting
regulation as its urgency to the Ethiopian environment could be influenced by the capital
market oriented founding rationales of this technology as it has been designed based on
Western liberalized economic philosophies and economic infrastructures;(Arnold, 2012)
narrates the harmonization of accounting standards as Western efforts to integrate the
world with one international norm through an international financial infrastructure
patterned on the Anglo-American model and conducive to the expansion of the western
financial services industry pre-date the East Asian Crisis; to facilitate the expansion of
financial markets and cross border transactions. The IFIs (WB and IMF) defined the
problems existing in the Ethiopian accounting systems based on their ROSC study report

44
and articulated that Ethiopia did not have any national accounting and auditing standards
that govern the accounting and auditing practices in the country. The ROSC 2007 report
indicated that the Ethiopian accounting and auditing practices and supporting institutions
and related regulatory environments were problematic that need to be overhauled with
new accounting infrastructure and regulatory set up within the framework of IFRS to
enhance the financial reporting environment to the international level standard. The
policy recommendations were identified and communicated to the Ethiopian Government
which in turn took the initiative to implement the recommendations in the context of
improving the macro-economic management of the country.

In line with the obligatory passage point (quality financial reporting through IFRS
infrastructure), the focal actor, the World Bank in its ROSC 2007 report articulated the
need for cooperation of a wide range of stakeholders including the Government,
regulators, captains of industry, academia and the accountancy profession to implement
the ROSC policy recommendations championed by the Government of Ethiopia. The
ROSC team recommended the establishment of National Steering Committee (NSC)
which is in charge of coordinating and monitoring the accounting and auditing reforms
to implement recommendations including, revising the accounting and auditing statutory
framework ,revising the commercial code of Ethiopia, enacting a financial reporting law,
establishing a National Accountants and Auditors Board(AABE) under the administration
of the Government and others in a way that resources are exploited and coordinated
towards adopting IFRS through which the existing problems in the Ethiopian accounting
system and related regulatory frameworks can be addressed in line with the macro-
economic objectives of the Ethiopian Government.

In February 2008, the ROSC reports were presented to stakeholders chaired by Ministry
of Capacity Building and OFAG to promote the IFRS adoption agenda (Participant 7);
this could be considered as the start of the interessement process that concerned
stakeholders are indentified , convinced and involved in the translation process referring
to the need for improvement of the Ethiopian financial reporting environment through
IFRS infrastructure as an obligatory passage point based on which the actors’ interests
are aligned in a way that the gaps articulated about Ethiopian accounting system and

45
regulatory environment in the problemtization stage (ROSC, 2007) can be addressed
through adopting the globalized financial infrastructure, IFRS. Improvement of the
quality of financial reporting through IFRS (OPP) to get accession to foreign financing
can be regarded as the point of negotiation between national and supranational (IFIs)
actors while advancing towards translating the Ethiopian accounting system into a new
regulatory framework suitable to IFRS based reporting.

The World Bank & IMF joint study conducted in 2007 (ROSC ,2007) can be considered
as the turning point for the Ethiopian IFRS adoption agenda; the activities conducted
before the ROSC study were not as such significant steps for IFRS adoption ( Participant
11).This participant commented that the ROSC study is a professional study and reflected
the reality of the Ethiopian accounting system and provided knowledge and awareness
among concerned stakeholders and hence, it created point of reference for IFRS adoption
agenda. It was noted by participants that the fact that Ethiopia did not have its own
national standards could be worth mentioning behind the drive towards the adoption of
IFRS agenda which can be regarded as a medium of negotiation between Ethiopia and the
IFIs in the context of enhancing the Ethiopian financial reporting environment and in turn
facilitate to gain access for foreign financing and attract FDI.

It was noted that the ROSC report is an important inscription that indicated the
problemtization of the existing Ethiopian accounting system and supporting institutions
and that Ethiopia did not have any accounting standards to follow and IFRS based
reporting practice did not exist in reality in the Ethiopian accounting environment even
though it was said to have been practiced in theory, especially in the Ethiopian financial
sectors which are considered as public interest entities for which the full adoption of
IFRS is primarily intended. It is to be recalled that banks and member organizations of
the Ethiopian Commodity Exchange have been declared as IFRS adopted entities (Tesfu,
2012) with reference to the banking business proclamations of 2008 (Mihret &
Dobe,2014) and ECX draft directives before the issuance of the Ethiopian Financial
Reporting Proclamation No.847/2014 that mandated IFRS adoption in Ethiopia in 2014.
However, the ROSC study indicates that IFRS was not practiced in reality in the banking
sector (participant 11 commented; ROSC 2007); it was noted that the IFRS practice was

46
not well practiced in Ethiopia and the financial sectors in particular; lack of professional
accountants has been noted as one of the limiting factors affecting IFRS practices.

The ROSC study document (inscription) can also be regarded as point of reference in the
interessement process that created knowledge (understanding) among concerned
stakeholders regarding the Ethiopian accounting system issues, whereby initiatives were
taken to improve the Ethiopian financial reporting practice through the IFRS
infrastructure (Participant 11). This notion could be in consistent with the initiatives
taken by the globalizing forces (World Bank & IMF) as part of harmonizing the
globalized financial reporting infrastructure in the context of improving the quality of
financial reporting for jurisdictions across transnational boundaries.

(Participant 11) noted that the IFRS adoption project stopped for some time, for about for
four years when it was under the Ministry of Capacity Building, where no significant
activities were done even though some awareness activities had been conducted. In the
meantime, Ethiopian Civil Service College had taken separate initiative and opened
office intended to provide IFRS related trainings, however, this isolated initiative was not
successful to carry out the intended objectives (Participant 11).

The translation process for the adoption of IFRS in Ethiopia given the current low
auditors capacity, low audit fee (auditors running for their subsistence life); subject
to regulations (IFRS requirements, when IFRS is adopted) could be against the interest of
auditors (audit firms). In contrast, there are counter arguments in the sense that there
could be professional development and competition with subsequent professional rewards
associated with the realization of improved accounting and auditing practices that
enhance the quality of financial reporting in the country. On the other hand, the
discursion point is that Ethiopia does not have stock markets and thus the urgency of
IFRS may not be needed at this time. It was noted that IFRS is complex to adopt with
existing financial reporting infrastructures and economic system with the notion that
IFRS is developed based on developed countries’ context especially that of UK. Low
level of professionalism in the area of accountancy, weak accounting and
auditing practices and associated supporting institutions were regarded as prohibiting
factors against the adoption of IFRS in the sense that the realization of its perceived

47
benefits may not be achieved as expected. However, this notion was forfeited by
counter argument that the issues could be resolved in the way forward activities
upon implementation of IFRS to the Ethiopian economic environment. It was noted that
the existing gaps in the Ethiopian accounting infrastructures can be addressed in the
future while advancing towards IFRS adoption and implementation by translating the
existing accounting system to a new accounting and regulatory environment suitable to
IFRS based reporting (Participant 8 commented). Participant 1 & 2 also expressed their
belief that the existing gaps can be addressed through IFRS adoption. Participant 7
strongly advocated the adoption of IFRS in Ethiopia by justifying various economic
rationales for Ethiopia.

This shows the interessement of the actors in the translation process of the IFRS adoption
that they seem to be convinced and interested about the integration of Ethiopia to the
globalized economic system through IFRS infrastructures.

Improving the current fragmented and inconsistent auditing and accounting practices of
the country was an uncontested theme. Participant 1 and 7 stated that in the absence of
financial reporting standards and lack of reporting frameworks in Ethiopia, auditors use
their own standards while conducting audit and preparing audit reports. This implies that
the consistency and uniformity of the accounting and auditing practices among
organizations has been compromised. The role of high quality financial reporting for
Ethiopia’s economic development was one of the key rationales presented to support
arguments for IFRS adoption in the country. Overall, the adoption of IFRS is believed to
contribute for the country's overall macro-economic objectives. This economic rationale
of IFRS adoption deemed to convince the Ethiopian government and other national actors
to strengthen their actor-network towards integrating Ethiopia to the global financial
reporting and regulatory system despite of the differences in economic setting between
Ethiopia, a developmental state economy and that of the transnational forces advocating
the adoption of IFRS in the context of market led economy. The arguments in favor of
IFRS adoption in Ethiopia foreshadow possible establishment of stock market in the long
run and the role of financial reporting in that context ( AABE five year strategic plan
2015/16-2020/21; participant 7; participant 8; draft organization structure and scope of

48
activities of AABE by technical committee for establishing AABE dated FEB 2010).This
indicates how the actors in the actor-network were advocating adoption of IFRS and
strengthened their network while conceptualizing the Ethiopian accounting regulatory
landscape in the context of this technology and in line with the Ethiopian government
shared interests with that of the globalized forces by locating the OPP as a point of
negotiation in the actor-network building. Improvement of the performance evaluation
systems of organizations, improvement of the tax collection systems, and attraction of
FDI were some of the other rationales behind the advocacy of IFRS adoption by
Ethiopian actors while conceptualizing and designing the new accounting regulatory
landscape of Ethiopia. It was also stated that this infrastructure can facilitate loan
arrangement based on financial reporting. This benefit is articulated with reference to the
currently collateral-based lending, which is perceived to have restricted access to finance
for firms. With these advocacy rationales, the actors seem to be convinced about the
IFRS adoption while developing the draft regulatory set ups of the Ethiopian accounting
system in the national actor-networks in which case the government played the leading
role in providing the direction and guidance of the project while the professionals played
their role in designing the conceptual map (regulatory framework) of IFRS adoption in
consultation with the government.

This global financial reporting infrastructure is expected to improve transparency and

good corporate governance. It enables to fulfill the requirements of (foreign institutions),
donors' requirements. This argument is based on the possibility that the adoption of
IFRS trigger the improvement of the financial reporting infrastructure. On a professional
level, IFRS and the associated reporting framework encourages accountability of
professionals and preparers and in turn lead to good corporate governance.

The independence of the professional associations from the regulating body (AABE) was
one of the issues subjected to debate by actors during the translation process (most
participants noted). Currently, it is the single institution the Accountants and Auditors
Board of Ethiopia (AABE) which is in charge of both roles (regulating the profession as
well as the accounting practice). There are no strong professional associations dealing
with professional development, regulation and quality control activities of the profession.

49
It was noted that lack of commitment among professional accountants and auditors for
the development of the professional associations was one of the problems; running for
their personal income (lives) was one of the associated reasons worth mentioned, even
though some say that now there is some progress regarding the development of the
professional associations (the professional associations signed memorandum of
understanding to work together or merge (Participant 8 commented). Participant 7
advocated the adoption of IFRS with justifications that the IFRS infrastructure would
enhance the quality of financial reporting to safeguard the country’s resources and
contribute for the macro-economic development. It was advocated that adoption of the
IFRS infrastructure could be a requirement for accession to World Trade Organization
(WTO) and foreign financing (Participant 7).It was advocated that for a country like
Ethiopia, which does not have its own national accounting standards, the adoption of
IFRS is the right option to enhance the Ethiopian financial reporting environment in the
context of managing the macro-economic development of the country through facilitating
financial reporting based lending (currently it is collateral based lending), accession to
WTO, FDI, establishment of stock exchange market etc (participant 7; Participant 8;
Gizaw,S.2009).

4.3.2 Enrolment and Mobilization: Establishment of the Ethiopian

Accounting and Regulatory Environment

This section presents analysis of the way forward activities (implementation of the policy
recommendations) defined by the focal actor in the problematization stage (ROSC, 2007)
and how actor networks played their roles in setting up of the Ethiopian financial
regulatory landscape, that laid a milestone for the adoption of IFRS and
subsequent implementation in the Ethiopian economic environment.

4.3.2.1 Ethiopian Financial Reporting Proclamation and Regulation

Following the policy recommendations of the joint World Bank & IMF study (ROSC,
2007), the Ethiopian Government took significant steps towards improving the Ethiopian
financial reporting infrastructures and regulatory frameworks in recognition of the
importance of the resultant quality and transparent financial reporting practices to the

50
socio-economic development of the country. In this respect, the focal actor (the World
Bank ROSC 2007 team) recommendations were accepted by the Ethiopian Government
in view of improving the accounting and auditing infrastructures in the country that in
turn would contribute to the overall management of the macro-economy. These economic
rationales are the mechanisms by which the globalizing forces (IFIs) influence the
national actors to adopt the international financial reporting infrastructures. In view of
these rationales, the Ethiopian Government took the initiative to manage the adoption of
these globalized financial reporting standards in the context of reconciling national
interests and that of the globalizing forces while institutionalizing the Ethiopian
accounting environment in line with IFRS frameworks. Subsequently, the Government of
Ethiopia under the leadership of the then Ministry of Capacity Building established high
level steering committee in August ,2008 (MoFED report on pre-IFRS proclamation
processes dated March 2015; and Interview : Participant 7) composed of various
stakeholders drawn from the government, the private sector, the academia and
practitioners to come up with mechanisms for the implementation of the policy
recommendations provided by the World Bank ROSC study team and in turn realize the
expected economic benefits that are articulated in the probelematization stage of the
Ethiopian accounting system and technical committee inscriptions (Technical Committee
for establishing the AABE and the professional body, Feb 2010). Participant 7 stated that
the adoption of IFRS in Ethiopia is the right option to build strong financial infrastructure
in a way that the country will have quality financial reporting practices for economic
decisions, satisfy the requirements of foreign financing and arrange preconditions for
establishing stock market in the long run.

Having discussed on the issues articulated in the ROSC study and about the way forward
issues, the steering committee in turn established two technical committees in 2009:
technical committee which is in charge of drafting a financial reporting law and technical
committee for the establishment of the National Accountants and Audit Board & the
professional body. These technical committees were set up by NSC to produce the draft
financial reporting proclamation, to formulate the organization structure and scope of
activities for the establishment of AABE and draft the bye-laws of the constitution of the
professional body (ICPAE). The national steering committee assigned the technical

51
committees to produce the above mentioned inscriptions (documents) within the
framework and requirements of IFRS adoption in Ethiopia. The technical committees
conducted discussions about their way forward activities and agreed to work on their
assigned responsibilities in line with the expectations of the National Steering Committee
(NSC) to which those technical committees were reporting the status of their assigned
projects (Minutes of Technical Committee for establishing professional accounting body
and AABE dated March 2009 and Sep 2009).

These steps can be regarded as the translation processes whereby national actors from
key institutions are enrolled and mobilized towards implementing the objectives set by
the recommendations of the focal actors (IFIs) within the framework and requirements of
IFRS adoption managed by the Ethiopian Government in the context of reconciling
national interests and that of the globalizing forces.

Under the instruction of the National Steering Committee led by Ministry of Capacity
Building , the technical committees produced documents such as draft financial reporting
proclamation of Ethiopia dated March 2010, draft constitution & bye-laws for the
professional body (Institute of Certified Public Accountants of Ethiopia (ICPAE) dated
Feb 2010 and draft organization structure and scope of activities of AABE dated Feb
2010 as part of the measures taken to implement the policy recommendations defined in
the World Bank ROSC study report.

Once the Ministry of Capacity Building dissolved, the Ministry of Finance and Economic
Development took the ownership of the IFRS adoption project in 2009/2010and
established steering committee composed of about 17 stakeholders to implement the
recommendations set by the World Bank ROSC study (MoFED report on pre-IFRS
proclamation processes dated March 2015). This translation process indicates the
expansion of the national actor-networks through enrollment of more actors while
mobilizing resources towards the implementation of the recommendations defined by the
globalizing forces (World Bank & IMF) to improve the Ethiopian financial reporting
infrastructure in line with the framework of the globalized financial architecture. This
shows how the enrollment of more national actors managed by the state strengthens the
actor-networks in a way that resources are mobilized towards a predetermined goal of

52
institutionalizing the Ethiopian accounting and auditing practices in the context of the
globalized economic infrastructure.

The above mentioned inscriptions of IFRS adoption project were presented to the steering
committee for discussion and comments (participants’ comments; Technical committees’
letters of submission for the draft inscriptions dated Feb and Mar 2010; MoFED report on
pre-IFRS proclamation March 2015). The steering committee once evaluated these draft
documents, more stakeholders composed of about 20 Federal Government Organizations
and Institutions were invited to further evaluate and comment on those documents.
According to the MoFED report on the Pre-IFRS proclamation processes of Ethiopia
dated March 2015, the draft documents were further commented and strengthened on a
conference held in the presence of about 35 stakeholders (actors) composed of the
government organizations and institutions, the private sector, the professional
associations, the academia and the IFIs.

In this translation process, MoFED can be regarded as the main government organ which
was in charge of mobilizing the national actor-networks by enrolling more actors in the
actor network constructions while arranging public conferences to discuss issues and
forward possible comments about the establishment the Ethiopian financial reporting
regulatory set up.

Participant 11 stated that MoFED arranged conferences involving various stakeholders to

discuss how the reporting infrastructures and legal frameworks are institutionalized to
Ethiopian business contexts. During the conference arranged by MoFED, various
stakeholders participated and discussed the issues and how those issues can be addressed
in the financial reporting proclamation. A lot of issues were raised about the possibilities
that should be made to institutionalize the legal framework that accommodates the
Ethiopian contextual factors, legal issues; interests of regulatory bodies etc.

It is to be recalled that the financial sectors were directed to implement IFRS by NBE in
2008 (Mihret and Bobe, 2014: Participant 11; Tesfu, 2012), however, they were not
provided with detailed IFRS implementation guidance. Even though, the financial
institutions did not fulfill the IFRS requirements in practice, it was noted that the

53
initiative was good at least to bring about the IFRS reporting frame work; to create the
initiative towards the globalizing reporting infrastructure, IFRS reporting framework. It
was stated that the effect of globalization and the need for the improvement of the
financial sectors necessitated the adoption of IFRS in the financial sectors; the IFRS
initiative in the financial sectors created at least mobilization activities towards IFRS
financial reporting practices. Participant 11 noted that Ethiopian transactions are not as
such complex to be affected by IFRS; Ethiopian accounts are not such market sensitive,
they are simple commitments, they are not market instruments, there are no derivatives
in the Ethiopian market. Having these grounds, participant 11 commented that the
accounts of financial sectors are not as such complex to adopt IFRS. This participant
advocated and suggested that the financial sectors shall recruit professional accountants,
create awareness, work on the reporting format and determine the accounts which may or
may not be affected by IFRS for effective implementation.

This stage of the translation process shows how the actors involving the national actors
and international actors managed by the state strengthened the actor-networks in the
translation process of IFRS adoption by enrolling more actors in the actor-network
construction while mobilizing resources to streamline the regulatory set up and financial
reporting framework of the country in a way that is suitable to the IFRS adoption. This
indicates the government’s initiative to get the various stakeholders involved and
participated in the translation process for which the government played a dominant role
in coordinating the actor-networks towards achieving the establishment of the accounting
regulatory set up for which more actors are mobilized and accepted this new idea to
incorporate Ethiopia into the globalized economic infrastructure.

Subsequently, OFAG amended the draft documents based on the comments and
evaluations obtained from stakeholder conferences and other written evidences for final
submission.

In Oct 2011, a public hearing conference was held by various stakeholders in Debreziet
Town, Management Institute to discuss and comment on the draft legal documents
(Financial reporting proclamation and regulation) to further improve the quality of those
documents ( MoFED report on the Pre-IFRS proclamation processes of Ethiopia dated

54
March 2015; and interview: participant 7 and participant 10). This was also noted by
other participants. During this time, the government established its own focused group
committees to discuss and amend the draft reports prepared by the technical committees
(participant 7 commented). At this stage of the translation process of the set up of the
financial reporting legal framework, the draft financial reporting proclamation was
discussed and commented by various actors for finalization and validation.

This is a stage whereby the final draft financial reporting proclamation and regulations
were validated through stakeholder debates and comments.

Subsequently, one professional team composed of MoFED, Ministry of Justice, Civil

Service College and OFAG was established to translate the revised draft of the
proclamation and the regulation into Amharic language and prepare the final version of
those documents. Accordingly, the team prepared the final version of the draft financial
reporting proclamation and regulation both in Amharic and English languages.

In June 2012, the final version of the draft financial reporting proclamation after having
been evaluated by the steering committee was submitted to Council of Ministers by
MoFED. In OCT 2013, the document was commented by the Council of Ministers and
returned to MoFED for further revision based on comments.

In Jan 2014, the proclamation was further amended based on comments provided by the
Council of Ministers and re-submitted to the Council of Ministers for further comments
and approval. Subsequently, in Feb 2014, the proclamation was approved by the Council
of Ministers and sent to the House of Representatives and then referred to the concerned
standing committees in March 2014 for further discussion and comments by the standing
committees. At this stage of the translation process, the proclamation was challenged and
commented by various stakeholders in a forum arranged by the concerned standing
committees of the House of the Representatives.

In April 2014, the concerned standing committees of the House of Representatives

further discussed on the proclamation based on the comments provided by the
stakeholders.

55
Subsequently, with the instruction of the Budget and Finance Standing Committees of the
House of Representatives, a special discussion was conducted on the proclamations by
National Bank of Ethiopia (NBE) and Ethiopian Commodity Exchange.

At this phase of the translation process, the parliament directed the draft for public
discussion and technical review. The NBE commented and recommended the regulatory
and financial reporting aspects of the financial sectors to be incorporated in the financial
reporting proclamation. Accordingly, the comments and recommendations were
incorporated in the financial reporting proclamation regarding the regulatory and
financial reporting aspects of the financial sectors in the context of IFRS based reporting
(Participant 11 stated).

NBE can be regarded as one of the main actors representing the financial sector in the
actor networks while translating the Ethiopian financial reporting system into a new IFRS
based regulatory and reporting environment. Finally, in June 2014, the financial reporting
proclamation was approved by the House of the Representatives of the Federal
Democratic Republic of Ethiopia.

Following the approval of the House of Representatives, the Ethiopian Financial

Reporting Proclamation was issued with Proclamation No.847/2014 in the Federal
Negarit Gazette of the Federal Democratic Republic of Ethiopia dated Dec 5, 2014.

This is one of the major products of the translation process conducted in the context of
actor-network construction involving the interactions of the state, other national actors
and international actors in the establishment of the Ethiopian financial reporting legal
framework and institutionalization of the Ethiopian financial reporting and auditing
infrastructure to integrate the Ethiopian accounting system in the context of the
international financial reporting standards and in turn to integrate Ethiopia to the
globalized economic environment.

Table 3 below indicates the actors participated in various forms and stages of translation
process of the IFRS adoption that transformed the Ethiopian accounting system into a
new form of financial reporting regulatory infrastructure that is supposed be suitable to
IFRS based financial reporting, for which the technical committees have taken other

56
countries’ experiences whiling designing the conceptual map of the IFRS based
regulatory frameworks to Ethiopia. Table 3: Actors of Ethiopian IFRS adoption process:

Supranational actors National actors

1. World Bank and IMF– 1. Government of Ethiopia
Main actor 2. Ministry of Finance and Economic Development
2. WTO 3. National Bank of Ethiopia(NBE); other banks
4. Ethiopian Professional Accountants and Auditors
3. Other institutions Association(EPAAA)
5. Federal Audit General(OFAG)
6. Ministry of Trade
7. Ethiopian Chamber of Commerce and Sectoral
Associations
8. Institute of Internal Auditors
9. Addis Ababa Chamber of Commerce and Sectoral
Associations
10. Addis Ababa University
11. Ethiopian Civil Service University
12. Ministry of Justice
13. Ethiopian Commodity Exchange
14. Public Enterprises
15. Government organizations, Ministries & Agencies
16. NGOs and others
Source: MoFED and other inscriptions

Following the issuance of the financial reporting proclamation and based on the mandate
articulated herein regarding the establishment of the Board, the regulation for the
establishment of the Accounting and Auditing Board of Ethiopia (AABE) was approved
by the Council of Ministers in Oct 2014. Subsequently, the regulation was issued with
Regulation No. 332/2014 in the Federal Negarit Gazette of the Federal Democratic
Republic of Ethiopia dated Jan 14, 2015. This document is a foundation for the

57
establishment of the AABE, which is the ultimate responsible organ in charge of
administering and regulating the country’s financial reporting practices and the
accounting profession.

The issuance of the Ethiopian Financial Reporting Proclamation (Proclamation No.

847/2014) and regulation (Regulation No.332/2014) are major steps in the establishment
of a new accounting regulatory frameworks and establishment of a new accounting
regulatory body, which are the foundations for the institutionalization of new financial
reporting, auditing and regulatory infrastructures in Ethiopia in line with the macro-
economic objectives of integrating the country’s financial reporting environment with the
international financial reporting standards, which is perceived to facilitate foreign direct
investment, foreign financing and establishment of stock markets in the long term.

These documents are the results of the actor networks involving the interactions of the
state, other national actors and IFIs in the translation process of institutionalization of
Ethiopian financial reporting infrastructures in the context of integrating the Ethiopian
economic system with the globalized economic infrastructure.

Article 5(1) of the financial reporting proclamation No.847/2014 states that “the financial
reporting standards to be used when preparing financial statements shall be”:
(a) IFRS issued by the IASB or its successor as adopted, adapted or amended by
the Board; or

(b) IFRS for Small and Medium Size Enterprises (IFRS for SMEs) issued by
IASB or its successor as adopted, adapted or amended by the Board; or

(c) International Public Sector Accounting Standards (IPSAS) issued by the

IPSAS or its successor as adopted, adapted or amended by the Board.

Article 5(2) states that “any public interest entity shall, without prejudice to the
provision of sub article 1(c)”of Article 5 above, be required to comply with IFRS
referred to in sub-article (1)(a) of Article 5.

Article 5(3) states that “the Board shall specify, in the financial reporting
standards, the minimum requirements for recognition, measurement, presentation,

58
 and disclosure in annual financial statements, group annual financial statements or
other financial reports which every public interest entity or small or medium
enterprise shall comply with , in the preparation of financial statements and
reports”.

Article 12(1) of the Proclamation No.847/2014 of Federal Negarit Gazette of

FDRE states that the auditing standards to be used by auditors in Ethiopia shall be
the International Standards for Auditing (ISA) issued by the International
Federation of Accountants (IFAC) or its successor as adopted, adapted, or
amended by the Board (AABE).

According to article 5(1) of the financial reporting proclamation, the adoption, adaption
and amendment options of IFRS to the Ethiopian economic environment are left to be
decided by the Board upon implementation.

Accordingly, currently (at the time when this paper is drafted), the board (AABE) has
already decided that Ethiopia has adopted IFRS as it is issued by the standard issuing
body (IASB) or its successor (AABE five years strategic plan-2015/16-2020/21;
participant 14 comment).

However, the adoption/adaption options were subjected to debate by actors during the
translation process of setting up of the Ethiopian financial reporting legal framework.
Participant 11 commented that the nature and level of the Ethiopian businesses may not
necessarily demand the application of all the IFRS requirements, hence, IFRS shall be
adopted/adapted depending on situations. Participant 7 and 8 advocate the adoption of
IFRS rather than adaption; they stated that adaption can be costly to Ethiopia under the
current capacity. It was also stated that establishment of national standards is costly to
Ethiopia; it requires more resources when compared to IFRS adoption; it was noted that
Ethiopia does not have enough qualified and authorized professionals who can set
national standards. It was stated that adaption cannot be considered as IFRS compliance.
Participant 4 stated that the adoption of IFRS and IFRS for SMES were favored during
the debates of the translation process with justifications that establishing national
standards ( or adapting IFRS) would require more resources (costs) and that Ethiopia

59
does not have the capacity to do that at this time. In view of the perceived economic
rationales, it was stated that the adoption option was advocated by professionals.
Participant 7 and 8 advocated that IFRS adoption would be the right option rather than
adaption in the sense that IFRS adoption would be important for investors operating in
transnational borders to maintain comparability and would be a foundation for capital
market establishment. In consistent with the global rationales of IFRS adoption, the
adoption option was more emphasized during the debates conducted during the
translation processes; with the exception of some differences, the technical committees
had similar views of IFRS adoption and had worked on drafting the proclamation based
on other adopting countries’ experience within the context of IFRS adoption rather than
customization (adaption) (Participant 8 stated).During the translation process, it was
noted by the actors that public interest entities (e.g., financial institutions and micro-
finance institutions) to use full IFRS adoption, and based on size IFRS for SMEs
(Participant 1, 4 and 8 commented).

Participant 8 noted that the institutionalization of this global financial infrastructure is an

important move to improve the financial reporting practices and would be a foundation
for the establishment of capital markets and strongly argued in favor of the importance of
adopting IFRS to the Ethiopian environment. This participant said that the adoption of
IFRS would trigger the establishment of capital markets.

4.3.2.2 Establishment of the Accountants and Auditors Board of

Ethiopia (AABE)

Establishment of AABE is one major step in the establishment of the new accounting
regulatory landscape of Ethiopia (Technical Committee for Establishment of AABE and
the Professional Body, 2010). The technical committees assigned by NSC as part of the
IFRS translation process and actor-network construction produced draft document
regarding the establishment of AABE and the professional body that finally led to the
issuance of the regulation that mandated the establishment of AABE, which is now on
board to mobilize and coordinate resources and activities towards the implementation of
IFRS by prepares within five years from the date of the issuance of the financial reporting
proclamation.

60
Article 4(1) of the financial reporting proclamation NO.847/2014 proposed the
establishment of the Accounting and Auditing Board of Ethiopia. The powers and duties
of the board were also proposed in article 4(2(a-q)) of the proclamation.

Accordingly, Article 3(1) of the Regulation No. 332/2014 issued by the Council of
Ministers states that the Accounting and Auditing Board of Ethiopia (AABE) is
established as an autonomous government organ having its own legal personality. Article
3(1) of the Regulation No. 332/2014 states that the board shall be accountable to the
Ministry of Finance and Economic Development (Participant 14 also commented).

It is a government body established pursuant to the issuance of the financial reporting

proclamation No. 847/2014 and mandated by Regulation No.332/2014. It is the ultimate
regulatory organ which is in charge of regulating and guiding the overall financial
reporting practices of the country.
The objectives of the board as articulated in Article 5(1-5) of the Regulation No.332/2014
include the following:
• Promote high quality reporting of financial and related information by reporting
entities;
• Promote the highest professional standards among auditors and accountants;
• Promote the quality of accounting profession and auditing services;
• Ensure that the accounting profession is used in the public interest;
• Protect the professional independence of accountants and auditors.
The powers and duties of the board are articulated in the article 6(1-16) of the regulation
No.332/2014 issued in the Federal Negarit Gazette of the Federal Democratic Republic of
Ethiopia.

One can see the overall scope of activities of the Board in the Regulation
No.332/2014 of the Federal Negarit Gazette of the FDRE.

It is noted that the activities which are being done by AABE after the issuance of the
financial reporting proclamation include: Recruiting human resource, registering
certified auditors and practicing accountants, creating awareness for professionals and

61
preparers (public interest entities), for preparers’ directors and board members (audit
committees and finance heads) , for professionals auditors and authorized accountants. So
far, such awareness creation training has been provided across the country (regions)
(Participant 5). This participant noted that establishment of IFRS training academy is one
of the strategic plans (training for the trainers) for AABE.

4.3.2.3 Institute of Certified Public Accountants of Ethiopia (ICPAE)

The initiatives of establishing professional accountancy body (ICPAE) can be traced to

the separate initiative taken by Ethiopian Civil Service College (ECSC) to establish an
Institute of Certified Accountants and Auditors (ICAA) with a World Bank funding
(ROSC 2007). The ECSC under its institute (ICAA) initially aimed to develop
accounting and auditing standards to the public sector and provide professional
certifications to public sector accountants and auditors with a plan to be a professional
institution in Ethiopia serving both the private and public sectors in certifying and
regulating the accountants and auditors, and setting accounting and auditing standards.

Following the ROSC study and IFRS adoption initiative of Ethiopia, a draft constitution
bye-laws, an inscription designed and aimed to establish the Institute of Certified Public
Accountants of Ethiopia (ICPAE) was produced by the technical committees assigned by
NSC(Technical Committee for Establishment of AABE and the Professional Body,
2010). This is one of the results of the translation processes of institutionalizing the
Ethiopian accounting environment aimed to establish an independent and strong
professional accountancy body.

The ICPAE could be a major milestone in the Ethiopian accountancy professional

development endeavors had this been implemented in practice.
According to the technical committee draft constitution bye laws of ICPAE 2010, the
purposes and objectives of the institute include:
• Promote and develop the science of accountancy, tax and financial management
in the public and private sectors in Ethiopia;
• To conduct research into the methods of developing and applying the accountancy
discipline

62
 • Maintaining high level of professionalism in protecting the public interest through
promulgating requirements for adherence to high quality professional standards
• Certifying professional competence that can entail national and international
acceptance etc (For further INFO, please see the draft constitution bye-law 2010).
Had this been the case, the establishment of ICPAE as an independent professional body
has been subject to debate by various national actors; there were debates among the
actors in the translation process about the separation of the roles of the professional body
and the regulatory body (some of the participants commented). The professionals
(academia, practicing professionals) advocate the independence of the professional body
from the regulatory body (Participant 4; participant 8; Participant 9 etc).It was noted that
the professionals(academia, practicing accountant etc) argued for the establishment of
independent professional body (say Institute of Certified Public Accountants for Ethiopia
(ICPAE) which deals with the professional body (Accountancy professional body)
affairs: certifying and controlling the integrity and professional development of the
country; whereas the government representatives argued for the existence of one
regulatory body which regulates the accounting practice(the reporting system) and the
profession with grounds (justifications) that there is no capacity of establishing and
handling two organizations with the current situation ( with further justification of
avoiding duplication of job and resource with one body); the Tanzanian experience was
considered for this case. The actors seem to have reached shared understanding about the
lack of capacity for the professional associations and that the professional associations
are not able to regulate the profession (self-regulation) at this time. It was stated that the
professional associations will take shared responsibility when they strengthen their
capacity in the future (Participant 8 and 14 commented).
It was stated that the professional body shall be independent of any influence; a strong
professional body with self-regulation shall be established aiming to develop the
profession, its integrity and practice and in turn contribute for the public interest.

Currently, the Board (AABE) has designed the strategic plan based on shared
responsibility principle and stated the need for the establishing professional body
(institute) in the strategic plan of action (Participant 14 commented); the AABE five
years strategic plan-2015/16-2020/21 states that local professional accountancy bodies

63
shall be established and developed in collaboration with local, regional (PAFA) and
international bodies (IFAC) ; the strategy document states the professional bodies to be
established need to obtain IFAC membership.

It was noted that the contributions of the Ethiopian accounting professional associations
to the development of the accountancy profession has been limited. Lack of commitment
among members (very discouraging) is one of the factors; it is volunteers (individuals)
who are contributing to the profession (Participant 13).

For example, the participant said that ASE is not contributing as expected to the
professional development. Let alone contribution to the professional development, even
the existence of ASE as association is questionable. The following are some of the causes
of the problems of ASE:

The members are not committed to attend conferences. In its current situation, the
association is not in a position to provide professional development benefit schemes.
ASE does not have its own internal source of financing. Hence, participant 13 suggested
that the members of the accountancy professional associations need to be committed to
contribute for the development of the associations and in turn to the development of the
accountancy profession in the country.

Participant 12 stated that there is professional gap to provide IFRS related trainings. It is
only the individuals, basically executive members of the professional associations that are
contributing to the profession; members could be oriented to the membership benefits
rather than contributions to the profession. Members provide only par time, voluntary
(free) services.

4.4 Enrolment and Mobilization: Implementation of IFRS by Reporting

Entities
The Ethiopian financial reporting regulatory landscape in the context of IFRS framework
has already been founded with the establishment of the ultimate regulatory government
organ (AABE) in the Council of Ministers Regulation No 332/2014 of the Negarit
Gazette of the FDRE and the financial reporting framework through the issuance of the

64
financial reporting proclamation No 847/2014 of Nagarit Gazette of FDRE. As per the
mandate given to it by the Council of Ministers in Regulation No. 332/2014, AABE is the
ultimate regulatory body which is charge of regulating the accountancy profession and
the financial reporting practices of the country. The financial reporting law has already
been issued with Proclamation No. 847/2014 of the Negarit Gazette of the FDRE which
mandated the adoption of IFRS in the Ethiopian Economic environment as part of
integrating Ethiopia to the globalized economic system which in turn is expected to
facilitate foreign direct investment, accession to foreign financing and establishment of
stock exchange market in the long run.

Since its establishment and until this time when this paper is drafted, the AABE has been
making any possible arrangements to settle the office under the umbrella of Ministry of
Finance and Economic Development. Currently the Accounting and Auditing Board of
Ethiopia (AABE) has already prepared five years strategic plan-2015/16-2020/21 in
which the IFRS implementation road map has been clearly indicated. The five years
strategic implementation plan was already approved by the board of directors of AABE
(Participant 14 stated). Currently, the Board has already decided to adopt IFRS as issued
by the International Accounting Standard Board (IASB) or its successor (Participant 14).

The Board has designed strategic action plan based on the current situations of the
Ethiopian accounting environment and devised ways to resolve the issues and
subsequently discharge its IFRS implementation responsibilities within the deadline. The
role of a strong professional body for the development of the accounting profession, the
accounting and auditing practices and in turn to integrate Ethiopia with IFRS framework
of reporting is highly recognized. In consistent with this notion, the Board has designed
strategic action plan based on shared responsibility principle between the regulating body
and the professional body to enhance the country’s financial reporting practices at the
international level standards. In view of this, the Board has put a mission statement to
establish a professional institute (Participant 14 stated).

According to the IFRS implementation road map and participant 14, Ethiopia has already
decided to fully comply with IFRS reporting practices until 2019; this implementation
road map is inconsistent with the time frame indicated in the financial reporting

65
proclamation Article 54(1). Currently, AABE can be regarded as the ultimate responsible
government organ which is in charge of mobilizing the IFRS translation process for
which the time frame for full compliance of IFRS implementation is defined by the
proclamation Article 54(1) to be until 2019 ( Participant 14 has also confirmed this fact).
The Board strategic document states that fully IFRS compliance before the national
mandatory requirement date shall be considered as voluntary adoption.

The Board’s five years strategic plan road map to IFRS implementation sates that the
IFRS compliance by reporting entities will be effected in three phases:

Phase 1: Implementation of IFRS by Significant Public Interest Entities

The strategy document states that the significant public interest entities include financial
institutions and public enterprises owned by federal or regional governments.

The IFRS implementation road map of the Board states that these organizations have
been provided with preparation time until July 7, 2017 and to start issuing IFRS based
financial statements for the year ended July 7,2017 and subsequently to fully comply with
IFRS based reporting until the 2019 deadline. According to the strategic document, July
7, 2017 shall be the mandatory date to start compliance with IFRS based reporting (This
is also substantiated by participant 14).

Phase 2: Other Public Interest Entities and IPSAs for Charities and Societies
These entities include all other public interest entities (ECX member companies and
reporting entities that meet the qualitative threshold for public interest entities) and
Charities and Societies. These organizations have been provided with preparation time
until July 7, 2018 and to start complying with IPSAs based reporting for the year ended
July 7, 2018 and subsequently to fully comply with IFRS based reporting until 2019
deadline.

Phase 3: Small and Medium-sized Entities (SMEs)

The SMEs have been provided preparation time until July 7, 2019 and to start compliance
with IFRS for SME based reporting.

66
These three phases of IFRS implementation actions can be regarded as the major
translation processes that would require involvement of more stakeholders that strengthen
the actor-networks to mobilize resources and actions towards the effective and efficient
implementation of IFRS by reporting entities in the Ethiopian business environment. In
view of this, more actors from various sectors (academia, preparers, accountancy
professionals, auditors, regulatory bodies, government, foreign actors in terms of
providing technical assistance etc.) need to be enrolled to mobilize the implementation of
IFRS and in turn realize the expected macro-economic benefits to Ethiopia. In view of
this, the strategic plan of the Board states that IFRS road map implementation task force
comprising the public and private sectors which include government agencies, prepares
and audit firms will be formed to support the stabilization of the IFRS adoption processes
that would entail effective implementation of IFRS. According to this strategic document,
there will be more involvement of actors in the IFRS implementation process in which
case the interactions of more actors are expected.

The IFRS implementation road map strategic actions can be regarded as the last stages of
the IFRS translation that would convert the new accounting regulatory frameworks and
set up produced in terms of inscriptions to practices through IFRS based financial
reporting by prepares and regulatory actions by the regulatory organ.

At this stage of the IFRS translation process, the Accountants and Auditors Board of
Ethiopia will have key roles in coordinating and mobilizing efforts and resources that
will lead to more actor-network constructions involving any concerned stakeholders
which include the government agencies, audit firms, preparers, academia, professional
associations, foreign institutions in terms of technical assistance and experience sharing
etc.

Interestingly, the Ethiopian IFRS implementation strategic document implies strong

actor-network interactions by enrolling more actors while mobilizing the IFRS transition
process towards implementation by prepares through IFRS based financial reporting.

It was noted that banks, insurance companies and multinational companies have started
reporting based on IFRS. Participant 1 noted that his employer audit clients have already

67
adopted IFRS and are being provided training about the methods of adoption of IFRS. It
was noted that Deloitte consulting is promoting IFRS adoption training and is providing
training to its clients and other organizations on demand. Currently, it provides training to
banks, insurance companies and manufacturing companies. It is noted that full IFRS to be
adopted for multinational companies, Insurance Companies and banks while IFRS for
SMEs to be adopted for firms with smaller sizes and having no public interest.

Another evidence of mobilization enrolment that strengthened the network is that no

curriculum has been designed in line with IFRS requirements in Ethiopia (or any other
country national standards); the need for curriculum development in line with IFRS
requirements was another concern raised by actors in the translation process of IFRS
adoption (participant 2).

Investors require financial information that is useful for investment decisions; overseas
loan providers require the adoption of IFRS (Participant 3). Donors require financial
reports prepared in accordance with IFRS (Participant 3). There had been pressure from
World Bank regarding the adoption of IFRS; the World Bank has a global initiative to
recommend and initiate the improvement of the financial reporting framework and
infrastructure of a country and hence the adoption of IFRS articulated through the ROSC
study.

The WB initiated the IFRS adoption agenda through its ROSC study and the Chamber of
Commerce was active actor in the ROSC project (Participant 4). Following the ROSC
2007 report, the Ministry of Capacity Building received the IFRS adoption project in
2009 and established a steering committee with two task forces: (a) to deal with the
establishment of the National Accountants and Auditors Board of Ethiopia (AABE) and
the professional accountancy body; and (b) to prepare the draft financial reporting law.
The task forces were composed of practicing accountants (EPAAA), AAU, Civil Service
University, Office of Audit General (OFAG) etc. After the task forces completed their
respective projects and submitted to Ministry of Capacity Building, the Ministry (MCB)
was dissolved and the IFRS adoption project ownership was transferred to Ministry of
Finance and Economic Development. There have been debates among the steering
committees whether to adapt or adopt the IFRS. However, IFRS compliance is expected

68
when fully implemented as it is indicated by the issuing body (IASB). It was indicated
that the adoption of IFRS and IFRS for SMES were favored during the debates with
justifications that establishing national standards (or adapting IFRS) would require more
resources (costs) and that Ethiopia does not have the capacity to do that at this time. Once
the task forces submitted their draft reports to Ministry of Finance & Economic
Development, the task forces were dissolved and the Ministry of Finance & Economic
Development assigned World Bank consultants for further assistance for the project
(AABE).

There were debates between and among the different stakeholders regarding the
separation of the roles of regulatory body and professional body. Professionals
(academia, practicing accountants, auditors, audit firms etc.) advocated and argued for
the establishment of independent professional accounting body, which deals with the
professional matters: licensing, certifying and monitoring professional integrity and
professional development of the country. On the other hand, government representatives
argued for the existence of one legitimate body (now it is defined to be AABE) reporting
administratively to the government body and is in charge both for the regulation of the
accounting and auditing practices (accounting system) and the accountancy body (the
profession) on the grounds that there is no capacity of establishing and handling two
organizations with the current situation (with further justification of avoiding duplication
of job and resource with one body). The Tanzanian experience was considered for this
case (Participants commented). Furthermore, it was noted that the government
representatives justified the necessity of only one body with the grounds that professional
associations could share the roles when they develop their capacity. The professional
associations on their part argued that there could be role mix up with one body handling
the regulation role and licensing and certifying the profession; the independence of the
profession and the regulation roles could be compromised. According to participant 4, the
academia and the practicing professionals were advocating the IFRS adoption project
whereas from the government side (ERCA, Ministry of Finance & Economic
Development) there seemed to be doubts about the importance of IFRS to Ethiopia and
the importance of the financial reporting laws during the translation process. It was
indicated that there had been lack of appreciation of the importance of the accounting

69
profession and reporting system to the country’s economy. The IFRS agenda was
promoted to major stakeholders through conferences, discussion forums which helped to
develop a shared understanding about the necessity of adopting IFRSs. The ACCA office
in Ethiopia played an important role in the IFRS adoption project through lobbying and
arranging discussion forums regarding IFRS adoption in collaboration with the academia
to create awareness though it did not have a direct role (played an indirect role).
Participant 4 noted that audit firms have played role in the IFRS adoption project through
their representative (EPAAA); which was represented in the technical committees. It was
noted that there had been no direct role of IFAC and IASB for IFRS adoption project in
Ethiopia, but indirectly though providing the standards. Now the financial reporting law
has been already issued and the AABE has been established and is on board to carry out
the way forward IFRS adoption (implementation) activities. The board is carrying
forward the licensing activities which have been done by OFAG. According to this
participant, had there been an independent professional body, there could have been a
strong possibility and opportunity for enhancing the professional capability and its
contribution for the effective and efficient implementation of IFRS in Ethiopia.

It was argued that full IFRS adoption would be too complex for the needs of the prevalent
Ethiopian business environment given that IFRSs are formulated based on the assumption
of an advanced market-based economy (Participant 6). The other alternative for Ethiopia
is to adapt or amend depending on the Ethiopian business contexts. It was noted that the
adoption option would be a huge challenge as the accounting graduates are not aware of
the IFRS reporting system. Participant 6 raised the concern that the audit firms could face
challenges while the IFRS is being implemented given their limited capacities to cope up
with the changes. He noted that the audit fees are low. He recommended that the auditing
and accounting practices shall be regulated by the board in a way that they enhance their
capacities and contribute more to the professional development, accounting and auditing
practices and to the IFRS adoption. He noted his concern about the accounting skills of
the preparers that the reports are being prepared with limited qualities.

Following the ROSC project, the Auditor General (OFAG) then Ministry of Capacity
building firstly took the ownership of the IFRS adoption project then after the Ministry of

70
Finance took the ownership of the project (participant 7). The IFRS adoption debates
started in 2002. Participant 7 noted the notion that the adoption of IFRS would be
required to enhance the Ethiopian financial reporting environment for stock market
establishment in the long term; a stock market requires strong financial infrastructure. He
reflected the role of Globalization pressure; the requirement of multinational companies-
consistency, comparability and quality financial information needs for economic
decisions as some of the factors driving the adoption and expansion of this global
financial architecture. Adoption of IFRS was the right option according to this
participant in view of the cost considerations as the resources required to establish
national standards would be prohibitive given the current capacities that Ethiopia have.
According to this participant, the IFRS adoption processes in Ethiopia can be classified in
the following phases: Phase 1: before 2000, Phase 2: 2000-2007, Phase 3: 2007-2014 and
Phase 4: 2014/2015 onwards.

The accounting practices were traditional and fragmented and were governed by GAAP
which was not clearly defined. The auditing practices were based on the fragmented
accounting practices. He said, in 2000, the pre-2000 accounting and auditing practices
were questioned by some of the professionals. Despite a general reference to GAAP, this
concept lacked clarity because there was no any accounting framework accepted by
Ethiopia (there were fragmented and traditional accounting practices). The audit reports
were questioned as they were prepared based on fragmented accounting practices (with
no accounting frameworks).

After 2000, following the EU initiatives, the IFRS enters the market and some of the
audit firms by their initiatives started to apply IFRS partially as the professionals were
ACCA qualified auditors. However, there were debates among some professionals
against and for IFRS application. Participant 7 noted that he advocated for application of
IFRS, whereas others argued that IFRS would not be necessary for Ethiopia. During
2007, there were debates for and against for ISA and IFRS adoption. It was noted that
HST was in favor of ISA and IFRS, whereas others were against, they even wrote
petition against the application of those standards. It was noted that chamber of

71
commerce prepared (workshop, conference ….) during 2007 as part of the initiatives
taken in IFRS adoption processes.

In 2007, Federal Audit General (OFAG) initiated the ROSC study to be conducted by the World
Bank. He noted that, in Feb 2008, the ROSC report was submitted and presented to stakeholders
chaired by the two key stakeholders (Ministry of Capacity Building and Auditor General)
basically ministry of capacity building. Then, national steering committee was
established in 2008 under the Ministry of Capacity Building with committee members
from key institutions and in 2009, two national technical committees were established
with about 7-8 members each. These committees include:

1. Professional structure and governance committee- Committee established to work on the draft
for the establishment of the professional body and organization structure of the regulating body
2. Legal framework committee- Committee established to work on the draft of the financial
reporting proclamation
Legal framework committee
During this stage of the translation process, there were debates for and against IFRS
adoption. The deliberations were also regarding the lack of standards in Ethiopia. The
main debates were conducted in May 2009 (no details). After completing their tasks, the
technical committees arranged a work shop (Participant 7 noted). After Ministry of
Capacity Building, the Ministry of Finance & Economic Development took the
ownership of the IFRS project. Initially, the government representatives did not accept
reports delivered by the technical committees; the legal frameworks were subject to
criticism. The technical committees’ stand was that the regulating body for accounting
and auditing practices and the professional associations (ICPAE) should be separate
independent, and the technical committees framed the legal framework based on this
assumption of separation of the professional body and regulating body. However,
representatives from the government side wanted the existence of only one body which is
responsible to regulate the profession and the accounting and auditing practices of the
country. Under this arrangement, the professional associations are to be accountable for
the single body (AABE). The professionals accepted the view that the professional body
shall be accountable for the single body, the AABE for some periods of time taking into
account the lack of commitment and capacity from the professional’s side. He told me

72
that, in 2011, the government established its own focus group committees for which this
participant was a member to discuss and amend the draft reports prepared by the
technical committees. Conference was held to discuss the issues involving participants
from different stakeholders.
Participant 11 stated that lack of knowledge of the IFRS practice could be worth noting
challenge that could be faced in the phase of IFRS implementation; this participant noted
that professionals need to have exposure to international practices.

4.5 Analysis and Discussions of the Results

This study has examined the process of IFRS adoption project and its implications in the
implementation phase in Ethiopia by locating this process in the context of the interplay
of the state, the accounting professionals, the business community and supranational
institutions (SNIs). The study shows how the state power in the institutionalization of
IFRS in an economy where the state sector is predominant in the economy played
significant role in mediating the actor-networks involving the national actors and the
globalizing forces while managing the process in the context of promoting
macroeconomic rationales of enhanced financial reporting supported by IFRS.
Assemblages of actors were involved in the IFRS adoption process in which indigenous
powers were not necessarily passive recipients of IFRS. Rather, the Ethiopian state has
led the adoption process actively and articulated the explicit ration of the project via
negotiations with SNIs.

This paper argues that this process has been neither an importation of standards through
plain diffusion nor an imposition by international agencies. Instead, the process involves
a complex process of actor-network construction that creates conditions of possibility for
IFRS adoption. It is argued that the interrelation between accounting, state and
supranational institutions in developing countries is necessary to understand IFRS
adoption especially in non-market based economies. This paper analyses IFRS adoption
in Ethiopia as part of integrating the country into the global economic arena, in which
case the translation of the country’s accounting regulatory landscape into a framework
that is suitable to IFRS based reporting is required. The political economic factors could
drive changes in accounting (Cooper and Sherer, 1984). The processes take in various
73
arenas of society (Burchell et al., 1985) such as national economic management
imperatives articulated through government policy. As purported functional roles of
accounting tools and their practical roles might differ ( Burchell et al., 1985), the study of
IFRS adoption needs to take this view into account. These states of affairs were in
existence as non-market centric nature of the economy and lack of distributed ownership
of companies did not presuppose high quality, standardize external reporting. While this
domestic context and the absence of overseas listed Ethiopian companies did not
transpire the urgent need for IFRS adoption, Ethiopia has been part of the global move
for international integration of the global economy and the associated reforms including
IFRS adoption (Mihret and Bobe, 2014).

Participant 6 suggested his view that full adoption of IFRS would be very difficult for
Ethiopia under the current situations and capacities; he justified his views that even the
USA with big capabilities did not fully adopt IFRS even though it is under the
convergence process. He said that IFRS is formulated based on the developed countries’
context; it is a UK based reporting system and is capital market oriented ; it is worth
noting that Ethiopia does not have capital market at this time. He said that due to the
complexity of IFRS and the nature of Ethiopian business environment, the full adoption
would not be advisable for Ethiopia at this time; rather Ethiopia shall adapt or amend
accordingly depending on the Ethiopian business contexts. In contrast, participant 7 and 8
advocate the adoption option rather than adaption with the notion that adaption of IFRS
could be too costly to Ethiopia at this time. Participant 10 on his part stated that IFRS is
developed based on other countries’ context; hence, Ethiopia can adapt this technology
based on its context.

It was noted that the accounting graduates are not aware of the IFRS reporting system, let
alone IFRS even the basic accounting skills are also being compromised in this
cotemporary period. It was remarked that the AABE under its current situation being in
its beginning stage has limited capacity and hence cannot be able to discharge its
responsibilities. Hence, it was suggested that AABE needs to have enough human
resources both in number and qualifications to discharge its responsibilities.

74
It was noted that the Board needs to be staffed with persons having accounting
professional qualifications and related disciplines with sufficient numbers and
experiences in the accounting and auditing practices. In order to follow up and update
changes made in IFRS by IASB, the board shall have sufficient personnel with the
necessary qualifications, experiences and number. The board shall get experiences from
other countries’ best practices and experiences. It was emphasized that the board shall
enhance its capacity in terms of logistics, human resources and administration in order to
effectively implement IFRS in Ethiopia. In order to ensure the implementation
(compliance of IFRS) in Ethiopia, the board shall have sufficient human resources with
experiences in accounting and auditing practices and professional qualifications. In
addition, it was noted that there is concern that the audit firms could face challenges
while the IFRS is implemented given their limited capacities to cope up with the changes
(changes from the unregulated auditing practice to regulated practice having legal
consequences upon non-compliance of the regulation set in the accounting law).It was
noted that the audit fees are low and hence, it was recommended that the auditing and
accounting practices shall be regulated by the board in a way that they enhance their
capacities and contribute more to the professional development , accounting and auditing
practices and to the IFRS implementation. It was stated by most participants that the
accounting skills of the preparers are low and that the reports are being prepared with
limited qualities. Participant 6 noted that the professional auditors are not committed to
strengthen the professional associations like EPAAA and Association of External
Auditors due to their engagement in their day today activities for subsistence.

75
 Chapter Five

Conclusions and Implications

5.1 Conclusions

This study has examined the IFRS adoption process starting from the traces of
inscriptions relating to accounting reforms that preceded the adoption of this technology
and its implications for the implementation phase by locating the process in the interplay
of national and transnational forces in the context of integrating Ethiopia into the global
economic arena. By drawing on Actor Network Theory (ANT), the study theorizes IFRS
adoption as a product of the translation processes conducted in the last two decades and
the Ethiopian efforts to integrate the country into the global economic arena through
IFRS infrastructure that served as an origin of the agenda to examine and suitably
reconstruct the accounting regulatory landscape in the country. The interpretations of this
study illustrate that improved financial reporting environment supported by IFRS was
viewed as a key Obligatory Passage Point (OPP) for Ethiopia’s access to external source
of finance. It can be concluded that while IFRS adoption is explained by the global move
of this technology as a global governance mechanism (Chua and Taylor, 2008),
institutionalization of this technology as an inscription occurs as a construction of actor-
networks involving actors such as the state, accounting, professionals and international
financial institutions.

This study illustrates that the IFRS adoption in the Ethiopian context is the result of the
translation processes involving the actor-networks of the state, accounting, professionals,
the private sector and international financial institutions while the state, i.e., the Ethiopian
government, played a management and mediating role of the translation processes in the
context of promoting macro-economic management rationales of enhanced financial
reporting supported by IFRS.

The study shows that while the Ethiopian IFRS adoption experience illustrates the macro-
economic rationale driven nature of IFRS adoption, the rationales and the processes of

76
translating the idea into Ethiopian context illustrates the socially constructed nature of
IFRS adoption.

These economic imperatives led to the development of actor-networks involving the

Ethiopian actors and IFIs to develop streamlined accounting regulatory landscape that is
suitable for IFRS based financial reporting. Accordingly, Ethiopia has established new
financial reporting regulatory environment by issuing financial reporting proclamation
and establishing regulatory body.

In view of this, Ethiopia has officially mandated IFRS adoption in 2014 and subsequently
established the AABE, which has taken its office as a new accounting regulatory organ of
the country under the umbrella of the MoFED. The board has already designed and
approved five years IFRS implementation strategic plan for which the effects are
expected to be realized within the years to come and that the reporting entities are
expected to be compliant with IFRS based financial reporting until 2019 deadline.

5.2 Implications

This study tried to examine the Ethiopian IFRS adoption process from the traces of
inscriptions beginning from the early 1990s to the present time, 2015 in the context of
actor-network construction involving the national and international actors while
advancing towards the establishment of the Ethiopian accounting regulatory and
reporting framework that is suitable to IFRS based reporting. Currently, the Ethiopian
IFRS adoption has already been officially mandated by financial reporting proclamation
No.847/2014 and Regulation No.332/2014 for the establishment of the regulatory body
(AABE), which has already established its offices and started its activities. While this
regulatory landscape is an outcome of the IFRS adoption processes conducted so far, they
serve as precursor to the IFRS implementation in the future by reporting entities. They
are not ends by themselves but the means to an end that is IFRS implementation and its
effects in the Ethiopian business environment. The study shows that the Ethiopian IFRS
implementation activities need to have more enrollments of national actors involving all
the concerned stakeholders of the accounting profession, academia, private sectors,
government, public enterprises and organizations, etc. and international actors in terms of

77
experience sharing and technical assistance in coordinated manner to achieve the IFRS
implementation strategic objectives.

This study argues that the role of the accounting profession in the country’s macro-
economic management and IFRS implementation in particular would be very significant.
Hence, the AABE needs to coordinate all concerned stakeholders to establish a strong
and independent accountancy professional body with self-regulation which will
contribute to the development of the profession and in turn to the enhancement of the
financial reporting environment in the country.

The study shows that there is little commitment and low capacity among accounting
professionals to contribute to the development of the profession and the practice as well.
Hence, this study suggests that the accountancy professional associations and members,
members of the accounting profession and others who are involved in the accounting and
auditing practices need to have more commitment to organize and coordinate resources in
collaboration with all concerned stakeholders to contribute their level best to the
development of the profession and in turn to the accounting and auditing practices in the
country.

This study suggests that more efforts need to be coordinated to build the capacity of
preparers in terms of financial reporting knowledge within the framework of the IFRS
before enforcing the financial reporting law in the case of non-compliance with IFRS by
prepares. This implies that the Accountants and Auditors Board of Ethiopia needs to
ensure that all concerned reporting entities are trained and well acquainted with IFRS
based reporting practices. In order to discharge its national responsibilities at the best of
achieving enhanced financial reporting practice in the country, the AABE needs to work
in coordination with all concerned stakeholders such as: the audit firms and professional
associations, preparers, government, academia, international institutions and with other
countries having the experience of implementing this infrastructure.

Regarding the academia, concerned curriculum developers need to incorporate the IFRS
education in the business curriculums as soon as possible to enhance the IFRS based
financial reporting knowledge among accounting graduates.

78
5.3 Potential Future Research Areas

This study indicates that Ethiopia has already mandated officially the adoption of IFRS in
2014. However, the implementation and its effects are yet to be realized in the future as
described by the AABE five years IFRS implementation strategic plan. In view of this,
this paper examined the IFRS adoption processes with the traces of inscriptions since the
early 1990s till the current time, December, 2015. Various literatures from other
countries experience show that there are a lot of research areas to be studied in the phase
of IFRS implementation by reporting entities.

The researcher would like to highlight the following potential research areas for future
research during the IFRS implementation phase by reporting entities:

• Evaluation of the IFRS implementation status by reporting entities: Challenges

and problems.

• The effect of IFRS implementation on the development of the Ethiopian Economy

• The effect of IFRS implementation on corporate governance

• The assessment of the overall consequences (effects) of IFRS implementation and

regulation in the Ethiopian Economic environment.

• The effect of IFRS implementation on the accountancy profession, accounting

and auditing practices: achievements on the development of the profession and its
practices

79
 References

Accountants and Auditors Board of Ethiopia (AABE) five years strategic plan 2015/16-
2020/21. (n.d.).
Ali, M. J. (2005). A synthesis of empirical research on international accounting
harmonization and compliance with international financial reporting standards.
Journal of Accounting Literature 24:1 .
Alp and Ustundang. (2009). Financial Reporting Transformation: The Experience of
Turkey. Critical Perspectives on Accounting , 680-699.
Apostolos, Ballas, Skoutela, D., & A.Tzovas, C. (2010). The Relevance of IFRS to an
Emerging Market: Evidence from Greece. Managerial Finance , 36 (11), 931-948.
Armstrong, C., Barth, M., Jagolizer, A., & Riedl, E. (2007). Market Reaction to the IFRS
Adoption in Europe.HTTP://SSRN.COM.
Armstrong, P. (1994). The influence of Michel Foucault on accounting research. Critical
Perspectives on Accounting 5 (1):25-55 .
Arnold, P. J. (2009). Global financial crisis: The challenge to accounting research.
Accounting, Organizations and Society 34 (6):803-809 .
Baba, U. (2013). Assessing Nigeria's Journey towards IFRS Adoption. Information
Management and Business Review,Vol.5,No.10,PP.505-513,Oct 2013(ISSN
2220-3796) .
Ball, R. a. (2005). Earnings quality in UK private firms: comparative loss recognition
timeliness. Journal of Accounting and Economics , 39 (1):83-128.
Ball, R. (2006). International Financial Reporting Standards (IFRS): Pros and Cons for
Investors . Accounting and Business Research ,36: , Sup1,5-27.
Benería, L. (1995). Response: The Dynamics of Globalization. International Labor and
Working-Class History (47):45-52.
Bloomfield, B. P. (1992). Management consultants: systems development, power and the
translation of problems. The Sociological Review , 40 (3):533-560.
Burchell, S. C., & Hopwood., A. G. (1985). Accounting in its social context: Towards a
history of value added in the United Kingdom . Accounting, Organizations and
Society , 10 (4):381-413.

80
Callon, M. (1986). Some elements of a sociology of translation. "Domestication of the
scallops and the fishermen of St. Brieuc Bay.” I Technoscience. The politics of
intervention, redigert av Kristin Asdal, Ingunn Brenna, og Ingunn Moser:57-78 .
Callon, M., Courtial, J.-P., Turner, W. A., & Bauin, S. (1983). From translations to
problematic networks: An introduction to co-word analysis. Social Science
Information , 2 (22):191-235.
Carmona, S., & Zan., L. (2002). Special Section: Mapping variety in the history of
accounting and management practices. European Accounting Review 11 ,
(2):291-304.
Chua, W. F., & Poullaos, C. (1993). Rethinking the profession-state dynamic: the case of
the Victorian charter attempt, 1885–1906. Accounting, Organizations and Society
, 18 (7):691-728.
Chua, W. F., & Taylor, S. L. (2008). The rise and rise of IFRS: An examination of IFRS
diffusion. Journal of Accounting and Public Policy , 27 (6):462-473.
Cooper, D. J., & Sherer, M. J. (1984). The value of corporate accounting reports:
Arguments for a political economy of accounting. Accounting, Organizations and
Society , 9 (3–4):207-232.
Cooper, D. J., Ezzamel, M., & Qu., S. (2012). Popularizing a management accounting
idea: The case of the balanced scorecard. University of Alberta School of
Business Research Paper (2013-03) .
Cox, R. W. (1987). Production, Power, and World Order. edited by R. W. Cox. Vol. 1.
New York: Columbia University Press.
Cresswell, K., & A.Worth, e. a. (2010). “Actor-Network Theory and its role in
understanding the implimenation of information technology development in
healthcare.” BMC Medical Informatics and Decision Making. .
Deng. (2013). The EU's Adoption of IFRS and the Implication for China:In the
Perspective of Accounting Quality and Information Comparability,MA thesis.
Draft Constitution bye-laws of Institute of Certified Public Accountants of Ethiopia,
Technical Committee for establishing the Professional body, 2010. (n.d.).
Draft Financial Reporting Law of Ethiopia ,Technical Committee for Drafting Financial
Reporting Law of Ethiopia 2010. (n.d.).

81
Draft Organization Structure and Scope of Activities of the National Accounting and
Auditing Board of Ethiopia, Technical Committee for establishing AABE and the
Professional Body 2010. (n.d.).
Evaluation of National Accounting and Auditing Development Program (ENAADP Feb
1999). (n.d.).
Ezzamel, M., & Xiao, J. Z. (2015). The development of accounting regulations for
foreign invested firms in China: The role of Chinese characteristics. Accounting,
Organizations and Society , 44:60-84.
Federal Negarit Gazette of the Federal Democratic Republic of Ethiopia, Council of
Ministers Regulation for the establishment and determination of Accounting and
Auditing Board of Ethiopia(AABE), Regulation No.332/2014, Addis Ababa 14th
January, 2015. (n.d.).
Federal Negarit Gazette of the Federal Democratic Republic of Ethiopia, Financial
Reporting Proclamation No. 847/2014, Addis Ababa 5th December,2014. (n.d.).
Feyissa, D. (2011). Aid negotiation: The uneasy “partnership” between EPRDF and the
donors. Journal of Eastern African Studies , 5 (4):788-817.
Gill, S. R., & Law, D. (1989). Global Hegemony and the Structural Power of Capital.
International Studies Quartely , 33 (4):475-499.
Gizaw, S. (2009). Global pendulum for local financial reporting . Addis Fortune, May
2009,Addis Ababa.
Grint, K., & Woolgar, S. (2013). The machine at work: Technology, work and
organization: John Wiley & Sons.
Gyasi, A. (2009). Adoption of IFRS in Developing Countries: The case of Ghana ,MA
thesis.
Hail, L., Leuz, C., & Wysocki, P. (2010). Global Accounting Convergence and the
Potential Adoption of IFRS by the United States: An Analysis of Economic and
Policy Factors.Working paper. Available at
HTTP://SSRN.COM/abstract=13573315.
Hoyle, Schaefer, & Doupnik. (2009). Advanced Accountingc (9th ed.). McGraw-Hill.

82
Humphrey, C., Loft, A., & Woods, M. (2009). The global audit profession and the
international financial architecture: Understanding regulatory relationships at a
time of financial crisis. Accounting, Organizations and Society , 34 (6):810-825.
IFRS Adoption and Implimenation in Korea and Lessons Learned . IFRS Korean Country
Report. (2012).
Ivrine, H., & Lucas, N. (2006). The Rationale and Impact of the Adoption of
International Financial Reporting Standards on Developing Nations :The case of
United Arab Emirates. In proceedings 18th Asian Pacific Conference on
International Accounting Issues, (pp. 1-22). Maui,Hawii.
Jermakowicz, E., & Gornik-Tomaszewski, S. (2006). Implimenting IFRS from the
Perspective of EU PubliclyTraded Companies . Journal of International
Accounting ,Auditing and Taxation , 15(2),170-196.
Jessop, B. (1994). PostFordism and the state. Post-Fordism: a reader:251-279.
Joshi, et al. (2014). ‘International Journal of Research in Commerce, IT & Management ,
4 (4).
Karampinis, N. I., & Hevas, D. L. (2011). Mandating IFRS in an unfavorable
environment: The Greek experience . The International Journal of Accounting ,
46 (3):304-332.
Kothari, C. (1990). Research Methodlogy,Methods and Techniques (2th ed.). New Age
International (P) Ltd.,Publishers,India.
Latour. (1996). On actor-network theory: a few clarifications. Soziale welt:369-381. .
Latour, B. (1978). Scinece and Action. Milton Keynes: Open University Press.
Latour, B. (1986). The powers of association. Sociological Review monograph , :264-
280.
Law. (1992). Notes on the theory of the actor-network: Ordering, strategy, and
heterogeneity. Systems practice , 5 (4):379-393.
Law, J. (1987). Technology and heterogeneous engineering: the case of Portuguese
expansion. . The social construction of technological systems: New directions in
the sociology and history of technology , 1:1-134.

83
Levant.y, Berland.N, & Alcouffe.S. (2008). Actor-Networks and the difussion of
management accounting innovations : A comparative study. Manangement
Accounting Research , 19:1-17.
Manfred, B. S. (2003). Globalization: A very short introduction: Oxford University Press,
Oxford, New York.
Mathews, & Perera. (1996). Accounting Theory and Development (3th ed.). Melbourne:
Thomas Nelson Australia.
Mihret, D.G., Alshareef, M., Ayman, B., 2014. Accounting professionalization and the
state: the case of Saudi Arabia, paper Presented Accounting Research
Seminar,December 2014, Melbourne Deakin University, Australia.
Mihret, D. G., & Bobe, B. J. (2014). Multiple informal imperial connections and the
transfer of accountancy to Ethiopia (1905 to 2011). Accounting history, 19
(3):309-331.
Mihret, D. G., James, K., & Mula, J. M. (2012). Accounting professionalization amidst
alternating state ideology in Ethiopia. Accounting, Auditing & Accountability
Journal , 25 (7):1206-1233.
Mihret, D.G., Grant, B., 2015. The role of internal auditing in corporate governance: a
Foucauldian analysis" Accounting, Auditing and Accountability Journal,
Forthcoming.
Obazee. (2007). Current Convergence Efforts in Accounting Standard Setting and
Financial Reporting: Los,Nigerian Accounting Standard Board,January 31.
Obazee, J. (2008). Towards Actualizing the Reliability of Financial Reporting in Nigeria:
The Role of the NIgerian Accounting Standards Board . The Nigerian
Accountant,41(4),19-21 .
Odia, J., & Ogiedu, K. (2013). IFRS Adoption : Issues,Challenges and Lessons for
Nigeria and other adopters. Mediterranean Journal of Social Sciences , 4 (3).
Perry, J., & Nölke, A. (2006). The political economy of international accounting
standard. Review of international political economy , 13 (4):559-586.
Peterson, S. B. (2001). Financial Reform in a devolved African Country: Lessons from
Ethiopia. Public Administration and Development , 21 (2):131-148.

84
Prather-Kensey, J. (2006). Developing Countries converging with developed country
accounting standards: Evidence from South Africa and Mexico. . The
International Journal of Accounting , 41(1),141-162.
Quigley, J. (2007). Delotte & Touche World Meeting, Berlin Germany.
Reports on Observance of Standards and Codes on Ethiopia(World Bank , 2007).
Robson, K. (1992). Accounting numbers as “inscription”: action at a distance and the
development of accounting. Accounting, Organizations and Society , 17 (7):685-
708.
Rong-Ruey. (2006). Convergence of Taiwan's Financial Accounting Standards with
International Financial Reporting Standards:Past,present and outlook,Accounting
Research and Developement Foundation,Twaiwan.
Scapens, R. W. (2004). Doing Case Study Research In The Real Life Guide to
Accounting Research: A Behind-the-Scenes View of Using Qualitative Research
Methods, edited by C. Humphrey and B. Lee. Oxford, UK: Elsevier, 257-279.
Singleton, V., & Michael, M. (1993). Actor-networks and ambivalence: General
practitioners in the UK cervical screening programme. Social studies of science ,
23 (2):227-264.
Sunder, S. (2007). Adverse Effects of Accounting Uniformity on Practice,Education and
Research Working Paper. Available at HTTP://SSRN.COM/abstract=1028517.
Tesfu. (2012). The Adoption of IFRS in Ethiopia: Benefits and Key Challeges.
United Nations Conference on Trade and Development: Country case Studies on
IFRS.August, 2008.
Walsham, G., & S.Sahay. (1999). GIS for District Level Administrationin India:
Problems and Opportunities . MIS quarterly 23(1):39-65.
Watts, R. (1977). Corporate Financial Statments: A Product of the Market and Political
Processes. Journal of Management , 52-75.
Watts, R., & Zimmerman, J. (1986). Positive Accounting Theory,Englewood
Cliffs,NJ;Prentice-Hall.
Whittington, G. (2005). The adoption of International Accounting Standards in the
European Union. European Accounting Review , 14:1,127-153.

85
Wong, P. (2004). Challenges and Sucess in Implimenting International
Standards:Achieving Convergence to IFRS and IASs(New York:IFAC).
Yin. (1994). Case study research: Design and methods. London: Sage Publications Inc.
Yin, R. K. (1981). The Case Study Crisis: Some Answers. Administrative Sciences
Quarterly , 26 (1):58-65.
Zori, S. (2015). The Transnational Adoption of International Financial Reporting
Standards in Africa, MSC thesis.

86
 Addis Ababa University
College of Business and Economics
Department of Accounting and Finance
Interview Check list on IFRS adoption processes in Ethiopia

Dear Participants,

The purpose of this interview checklist is to collect data for research work (thesis) on
IFRS adoption process in Ethiopia as a requirement for partial fulfillment of MSC degree
in Accounting and Finance at Addis Ababa University. The study aimed at assessing the
overall IFRS adoption process in Ethiopia, related issues and implications to reflect the
Ethiopian experience and put point of reference for Ethiopian IFRS adoption practices
and recommend ways for implementation.

I would like to kindly request you to review the stated interview points indicated below
for your analysis and readiness for the face-to face interview at your good office and
convenient time. Your opinions, ideas and expectations as member of the accounting
profession and as per your roles in the Ethiopian IFRS adoption processes would be very
important inputs to conduct this study and in turn will have important implications for
Ethiopian accountancy practices and IFRS implementation in particular. Your objective
and genuine responses are very valuable for the successful completion of this study.
I would like to assure you that the information you provide will be presented in this
study with high level of responsibility and professionalism and will be used exclusively
for academic purposes.

I thank you very much in advance for your cooperation and sacrificing your valuable
time!!!

With Kind Regards,

YitayewMihret
 IFRS Adoption Process: the Ethiopian Experience
A. Interviewee’s Profile
Date of interview:_____________________ Location:___________
Time started:__________________ Time completed:___________
Interviewee profile:
Employer: __________________________________________
Role in the IFRS adoption project:
________________________________________________________________________
________________________________________

B. General questions about IFRS

1. How did the accounting reforms relate to other components in the Ethiopia’s
overall private and public sector reform agenda?
2. What is the current status of the IFRS adoption projects? Are companies now
reporting based on IFRS?

3. What were the overall processes of IFRS adoption in Ethiopia (starting from
initiation of the IFRS adoption project till the current status)? The following
issues shall be discussed:

(Project initiation, stakeholders involved, debates and rationales for IFRS

adoption, challenges faced and their solutions, Conceptual design and map of the
IFRS adoption, regulatory bodies and institutional arrangements, financial
reporting infrastructure reform and development , amendments made for laws and
proclamations , education & training(professionalism) , possibly the way forward
issues can also be discussed etc ).
 C. Detail Interview Check list

Phase 1: Exploring limitations and issues of pre-IFRS framework and rationale for
IFRS adoption
1. Who were the main actors/stakeholders in the IFRS adoption process? What were
their roles and influences? List of actors(stakeholders )

2. How did the IFRS adoption agenda originate and get promoted to major
stakeholders? Did the idea originate from within Ethiopia or were there some
pressures from the globalising external world? Who initiated the IFRS adoption
project and who advocated the project? When? How? Why?

3. How were the rationales for IFRS adoption articulated? What were the identified
problems/issues in the Ethiopian financial reporting framework that were
supposed to be addressed through IFRS adoption? What were the debates?
4. What were the implications of IFRS adoption to each actor (or groups of actors)?
How were actors/stakeholder’s views reconciled, if there were differing view?

5. What were the challenges/problems encountered at this phase of the IFRS

adoption process and how were the challenges resolved? How were key
actors/stakeholders persuaded?

Phase 2: Development of conceptual design of the IFRS for Ethiopia

6. What were the processes for designing conceptual map of the legal and
regulatory framework necessary for IFRS-based financial reporting? (Laws,
regulatory agencies, educational/training, financial reporting infrastructure, etc.)
7. What adaptions or modifications to the IFRS considered and made? Did the
various groups of actors/stakeholders hold divergent views on this issue?
8. What other issues/concerns were raised by each group of actors during this phase
and how were the issues settled?
Phase 3: Proclamation and implementation of IFRS by reporting entities
9. What were the amendments to the legal framework (e.g., issuance of the financial
reporting proclamation) associated with IFRS adoption? How difficult was it to
get those amendments?
10. Did any issues surface after implementation? (The implications and way forward
issues can also be discussed.
D. Supplementary Interview Questions
1. What were the major components (phases) of the IFRS Adoption project (process)
in Ethiopia?
2. What challenges were faced in the IFRS adoption project (processes) and how
were those challenges addressed and resolved?
3. What were the factors affecting the IFRS adoption process in Ethiopia?
4. What measures are taken and to be taken for effective implementation of IFRS in
Ethiopia?
5. What are the achievements materialized so far of the IFRS adoption process in
Ethiopia? (Progresses, phases etc).
6. What are the implications of IFRS adoption process in Ethiopia?

7. What are the expected activities to be performed?( Public awareness creation,

education and training, professionalism and professional body, institutional and
regulatory issues, etc)
8. What is the planned and expected deadline of IFRS full adoption in Ethiopia?
9. What are the expected outcomes (benefits) of IFRS adoption when fully
materialized?
10. Were there any expected professional supports from international experience? If
so, what are they?
11. Is there any preparation period set before the full and effective implementation of
IFRS in the Ethiopian business environment?
12. Are there any established regulatory organs which are in charge of monitoring
enforcement issues, compliance and consistency of IFRS adoption in Ethiopia?

13. What is your role in the IFRS adoption and implementation processes?
 14. What is your opinion on the timeliness of IFRS adoption in Ethiopia?

15. What is your option on the challenges that Ethiopia may face on the way to IFRS
implementation?

16. What is the IFRS implementation plan?

17. To what degree have the companies adopted IFRS?

18. What is the role of professional associations for the professional development
and IFRS implementation?

19. What is the state of accounting professionalization in Ethiopia (Curriculum

relating to IFRS) and its impact on IFRS implementation?

Note: the interviewees are not expected to limit themselves only to the issues and
questions listed in the above check lists; they are also kindly requested to provide the
interviewer with information (data) which they consider are relevant and related to IFRS
Adoption process in Ethiopia( Just briefing the overall IFRS adoption processes).

Thank you!!!