Having the International Financial Reporting Standards (IFRS) compliant financial statement would be beneficial to participate in the capital market, according to the Ethiopian Capital Market Authority (ECMA).
IFRS bring transparency by enhancing the international comparability and quality of financial information, enabling investors and other market participants to make informed economic decisions.
Accurate financial documentation is also necessary to measure important metrics, including debt-to-asset ratios, which investors use to evaluate how effectively companies pay down debt and generate revenue.
ECMA Director-General Brook Taye told ENA that the most important element IFRS compliant are not necessarily for anybody but for the company itself because it would let you know and understand the true value of your company.
“IFRS bring its new ways of understanding the value, measuring the value of a company.” So, the first beneficiary of IFRS is the company itself.
The director-general elaborated that by adopting IFRS private companies would ultimately know the true value of their company. And knowing the true value of a company as an owner is very beneficial as you know where you stand.
Also, IFRS are crucial for financial statements to be consistent, reliable, and comparable between every business in any country.
“IFRS’s main purpose and benefit are for the companies themselves. That is the primary benefit and it would allow for example if they want to participate and list in the capital market. Then having the IFRS compliant financial statement would be beneficial because you would know the true extent of the companies’ performance.”
For investors, he affirmed the standards give some confidence that the company has been properly recording its performance, paying its taxes, and the asset valuation of many properties that company have.
In general, the IFRS is important for the overall economy, Brook noted.
The process of realizing a capital market in Ethiopia is well underway in order to ensure the existence of a functioning market soon, it was learned.
The capital market is a financial system that allows private and public institutions to buy and sell equity and debt instruments companies to raise long-term funds through the sale of securities such as stocks and bonds.
Source: Ethiopian News Agency