17 Ethiopian Banks have hired KPMG to help them upgrade from the old accounting system IAS 36 to the new international accounting standard IFRS 9. The accounting firm will assist the lenders to prepare their 2019 financial statements in accordance with IFRS 9 which is the latest system of accounting worldwide.
KPMG beat its rival firm PWC to win the Ethiopian contract worth $1.83 million (KSh184 million). KPMG’s Head of Risk and Management Brian D’Souza signed the agreement with Ethiopian Bankers’ Association President Addisu Habba at one of the banks.
Ethiopian banks previously used IAS 36 which is easy compared to IFRS 9. One of the main features of IFRS 9 is the requirement that banks recognize ‘expected’ impairment loss as opposed to ‘incurred’ impairment loss. The move to the internationally accepted accounting system is expected to encourage foreigners to invest in Ethiopia. A partner with one of the local audit firms said, “As the reporting system is in line with a globally accepted practice, multinationals will be encouraged to invest in the country.”
The Accounting and Audit Board of Ethiopia is the body in charge of regulating and implementing accounting standards in the East African nation. The organization instructed financial institutions such as banks and insurance providers to adopt the IFRS accounting standards by the end of 2018. All other businesses in the country are expected to comply with the regulation by 2020.