IFRS(International Financial Reporting Standard) was set to be the accounting standard in Kenya in 1998 by the council of ICPAK
(Institute of Certified Public Accountants of Kenya)
All
financial statements covering periods beginning January 1, 1999, must be
prepared in accordance with IASs. IASs are required for
enterprises of all types and sizes, both listed and non-listed (Deloitte Touche
– International Financial Reporting Standards, Page 4).
Even
though there were no laws for listed companies to prepare their financial
statement according to IAS, listed companies were advised by the Capital
Markets Authority (CMA) to follow IASs.
The
rule changed in June 2001 when CMA made IASs mandatory for accounting and
financial reporting by all listed companies.
The
Banking Supervision Department of the Central Bank of Kenya used its legal
authority to require individual banks to disclose information in compliance
with IASs (Worldbank. 2001. Page 5).
However,
due to limited resources and the lack of supervision in Kenya, there are gaps
between applicable accounting standards and the actual accounting practices.
In
the Self-Assessment Questionnaire submitted to IFAC by ICPAK in 2005, it was
further confirmed that the requirement for adopting IFRS has been legalized for
both listed and non-listed companies in the Companies Act in the latest amendment
in 2002 (Assessment of the Regulatory and Standard-Setting
Framework -Institute of Certified Public Accountants of Kenya, 2005, Section 4).
Kenya is in the fourth stage of the adoption
process by the above, and this completes the adoption process.
There
is one stock market in Kenya, the Nairobi Stock Exchange, in which the shares
of about 50 companies are traded. In addition to these listed companies, there
is also sizeable number of companies which are either multinationals or owned
privately by Kenyans, as well as a large number of small- and medium-sized
enterprises (SMEs). In terms of financial reporting, all these companies are
required to prepare financial statements based on International Financial
Reporting Standards (IFRS). In most cases however, most SMEs would prepare
financial statements for use by the tax authorities or by the banks for
purposes of accessing credit.
Other
public interest companies such as, among others, banks, insurance companies,
cooperative societies, non-governmental organizations also prepare accounts in
accordance with IFRS.
The
accounting profession in Kenya is regulated by the Accountants Act Chapter 531, Laws of Kenya which was enacted on 1 July
1977. The Accountants Act established three bodies, namely the:
a. Kenya
Accountants and Secretaries National Examinations Board (KASNEB),which was
given the responsibility of administering examinations for persons intending to
qualify for registration as accountants and company secretaries. The Board
administers the Accounting Technicians examinations as well as the higher level
Certified Public Accountants (CPA) examinations.
b. Registration
of Accountants Board (RAB), which was to be responsible for the registration of
those who have attained the specified qualifications after passing the relevant
examinations administered by KASNEB. Persons holding designated foreign
accountancy qualifications are allowed to be registered with the RAB after
passing the examinations in company law and taxation administered by KASNEB.
The RAB also issues practicing certificates to those who have met the
requirements prescribed for issuance of a practicing certificate. These
requirements include prior registration and membership of ICPAK as an
accountant, as well as relevant experience in auditing for a minimum period of
two years.
c. Institute of Certified Public Accountants of
Kenya (ICPAK), which is responsible for the oversight of the profession. Once
someone is registered as an accountant by the RAB, he or she becomes eligible
for membership of ICPAK. ICPAK is mandated by the Accountants Act to perform
the following functions:
·
to promote standards of professional
competence and practice amongst members of the Institute;
·
to promote research into the subjects of
accountancy and finance, and related matters, and the publication of books,
periodicals, journals and articles in connection therewith;
·
to promote the international recognition
of the Institute;
·
to advise the Examinations Board on
matters relating to examination standards and policies;
·
to carry out any other functions
prescribed for it under any of the other provisions of this Act or under any
other written law; and
·
To do anything incidental or conducive
to the performance of any of the preceding functions.
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