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What are the benefits of IFRS implementation to a company?

What is IFRS?

International Financial Reporting Standards (IFRS) are a set of high quality, transparent, and comparable global accounting standards developed by International Accounting Standards Board (IASB) which is an independent standard-setting board. The standards provide a common accounting language so businesses and their financial statements are consistent and reliable across companies and countries.


Capital Markets have increasingly become more and more homogeneous due to globalization hence a need for common, consistent, reliable, and high-quality financial reports for all sectors of every economy.  They are intended to provide;

  • Harmonized financial statements in order to facilitate cross-border comparisons
  • Increase reporting transparency
  • Decrease in information costs
  • Reduce information asymmetry and thereby increase the liquidity competitiveness, and efficiency of the markets (Nulla, 2014).

Globally, the standards have emerged as the dominant reference for financial reporting, perhaps due to the influence of investors’ demand, cost minimization in financial reporting, security listing requirements, foreign investments, free trade, and global competition (Nulla, 2014).

Kenya on the other hand was one of the first countries to adopt the use of IFRS and IAS in 1999 and made it a requirement for all companies to prepare financial statements based on IFRS. However, a number of companies are not keen on adopting the IFRS due to the bottlenecks and difficulty in changing from their existing reporting systems to the new one. This could be attributed to the high cost involved, including the cost of retraining their existing staffs in this regard as most of them lack the knowledge of IFRS application in financial reporting preparation.

What are the benefits of IFRS implementation to a company?

Notwithstanding, that there are some challenges to face by companies in their decision to adopt IFRS; its worldwide adoption has been promoted on the premise of its perceived benefits which are considered to outweigh the costs. The benefits are but not limited to:

  • Reduced P&L volatility
  • Enhanced risk management toolbox
  • Competitive advantage
  • Revenue growth etc.
  • Increase liquidity