The Challenges and Prospects of First-Time Adoption of International Financial Reporting Standards (IFRS) in the Case of Selected Commercial Banks

Abstract

This study aims to investigate the challenges and prospects of first-time adoption of International Financial Reporting Standards (IFRS) in financial institutions with particular reference to selected commercial banks. To answer research questions, the study adopted mixed research approach. Thus, to gather data, both primary and secondary sources have been used. As primary sources of data, questionnaires and interviews have been used while review of relevant documents as secondary sources. The closed-ended questionnaire data were analyzed and interpreted quantitatively using descriptive statistics – frequency distribution and percentages. Whereas, data gathered from semi-structured interviews and open-ended questionnaires were interpreted qualitatively. On the basis of the major findings, lack of preparedness for IFRS adoption both from the companies and the regulatory bodies’ side, difficulty of understanding and implementing IFRS, existence of difference between the directives of the National Bank and the requirement of some IFRSs, lack of proper guidance from the regulatory bodies and fair value measurements are the major challenges during first-time adoption of IFRS. In addition, the requirement of the regulatory bodies is the major factor that influenced the companies to adopt IFRS not their own interest. Moreover, the study also found that improvement of the quality of financial reporting, reporting transparency and simplicity of raising capital are the main practical benefits (prospects) that the companies expect to derive from IFRS adoption. Finally, conclusion is made on the basis of the above major findings and also the study suggests recommendations that a combined effort from the concerned stakeholders to be put in order to successfully achieve practical adoption and implementation of the International Financial Reporting Standards.