Kenya is not yet ready for IFRS-9 – the new a must use international financial reporting standards
After attending the Barclays Bank workshop on IFRS-9 on Monday last week, I couldn’t help but come to the conclusion that Kenya has a special place in unpreparedness. Sadly, the Barclays Bank workshop came at a time when Confederation of African Football had stripped Kenya the rights to host the 2017 CHAN tournament, citing among other things “lack of preparedness”. Kenya’s permanent secretary in charge of spots would explain away the unpreparedness by stating that the country had put in place all necessary amenities including Hotels, Transport and Security – that the only thing that was missing were the stadia.
Professionals like Accountants would really want to laugh at the sports ministry, especially given that 21 years earlier Kenya had been denied the chance to host AFCON over similar lack of preparedness circumstances. But Accountants in Kenya aren’t themselves ready to implement a new International Financial Reporting Standard (IFRS) – 9, which replaces the current IAS 39.
Accountants in Kenya are not ready to implement the new standards because the guidelines meant to help the accountants effectively apply IFRS-9 in their financial statements are yet to be put in place. This is despite the fact that IFRS-9 has been around since 2014, allowing accounting and financial bodies to test the new standards and generate guidelines several years in advance before the standard come into force. A country like South Africa ran IFRS-9 demos from 2014 and by June 2016 were able to publish guidelines for applying IFRS-9. In Kenya however, the guidelines are expected to be published in December 2017, only a month to the enforcement of the new standards.
There are those who may find nothing bothersome with the late publication of guidelines for the new standards a month to the enforcement of the new standards, but it is important to mention that IFRS-9 is a complete divergence from the IAS-39, where IFRS-9 not only reclassify financial instruments, but also view them from a proactive philosophy away from the reactive philosophy of IAS-39.
The IFRS-9 divergence from IAS-39 will have great impacts on financial statements not only on financial institutions like banks, but across financials statements of almost all companies in Kenya. The greatest impact will be seen in the figures reported as profits/losses, as book figures for profits are expected to reduce whereas losses are expected to increase in most instances. This is because in IFRS-9, all impairments will be calculated in advance and reported accordingly, whether or not at the end of the financial period the impairments have been incurred.
Right now, Kenya accountants haven’t run IFRS-9 parallel with IAS-39, so that they can know and account for the differences between the two financial reporting standards – something that South Africa has done so effectively. This then means that once the Kenya accountants start reporting their finances using the IFRS-9, they will find it hard explaining the likely huge differences in profits or losses in their books.
As we wait for the enforcement of IFRS-9 as from January 2018, I can’t help but imagine, what were the professional accountants in Kenya waiting for the last four years so that IFRS-9 doesn’t catch them off-guard?