Kenya’s Compliance with International Financial Reporting Standards (IFRS)

Kenya has made significant strides in adopting and implementing international financial reporting standards, specifically those issued by the International Accounting Standards Board (IASB). The Institute of Certified Public Accountants of Kenya (ICPAK) plays a crucial role in promoting the adoption of IFRS standards in the country.

Mandatory Adoption

According to the ICPAK, all domestic public companies whose debt or equity securities trade in a public market are required to prepare their financial statements in accordance with IFRS Standards. Additionally, all foreign companies listed on Kenya’s stock exchange must also follow the same requirements.

Auditor’s Report and Basis of Presentation Footnote

The auditor’s report and basis of presentation footnote in financial statements prepared in conformity with IFRS standards explicitly state that the financial statements have been prepared in accordance with IFRS standards.

Incorporation into Law and Regulations

Kenya has incorporated IFRS standards into law and regulations, with various government agencies, including:

• Central Bank of Kenya
• Insurance Regulatory Authority
• Capital Markets Authority
• Retirement Benefits Authority

requiring compliance with IFRS standards. The Nairobi Securities Exchange listing rules also require companies listed on the exchange to follow IFRS standards.

Adoption Process

The ICPAK does not have a formal process for endorsing or adopting new or amended IFRS standards, but instead follows the IASB’s effective dates for issuing new and amended standards.

English Version Used

While Kenya has eliminated accounting policy options permitted by IFRS standards, it has made no modifications to any of the standards. The English version of IFRS standards is used in Kenya, with no translation process in place.

Adoption of International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs)

Kenya has also adopted the IFRS for SMEs standard for certain small and medium-sized entities (SMEs). All entities that are not publicly accountable and prepare general-purpose financial statements are permitted to apply the IFRS for SMEs standard, while publicly accountable entities must use full IFRS standards.

Optional Framework

For SMEs that are not required to use the IFRS for SMEs accounting standard, they may use other accounting frameworks. The ICPAK has designated certain entities as being publicly accountable and excluded them from using the IFRS for SMEs standard.

Conclusion

Kenya’s adoption of international financial reporting standards demonstrates its commitment to transparency, accountability, and good governance in the financial sector. The country’s experience serves as a model for other developing economies seeking to improve their financial reporting practices and increase investor confidence.