Stating IFRS compliance in Kenyan statements
How Kenyan financial statements and audit reports should name the framework used, why dual reporting is out, and the checks a reviewer makes before issue.
By Achekam · · 5 min read · For Accountants & audit firms in Kenya
One sentence in a set of financial statements carries more weight than its length suggests: the one that says which framework the statements follow. Get it wrong, and the reader does not know what rules the numbers were prepared under. Get it inconsistent with the auditor's report, and a careful lender or regulator will start asking what else is inconsistent.
In Kenya the answer is usually short: IFRS Standards, or the IFRS for SMEs Standard. The work is in making sure the statement is accurate, that it matches the framework actually applied, and that the auditor's report says the same thing. This article explains what the IFRS Foundation's profile of Kenya records, how to word the statement, and the checks a reviewer should make before issue.
What the IFRS Foundation's profile records
The IFRS Foundation keeps a jurisdiction profile for Kenya. It is old: the profile was last updated on 16 June 2016. It remains the Foundation's own record of how Kenya uses the standards, so it is worth reading with that date in mind and checking ICPAK's current position for anything that may have moved since.
On how compliance is stated, the profile says that the auditor's report and/or the basis of presentation footnote states that the financial statements have been prepared in conformity with IFRS Standards. It also says that "dual reporting", meaning a statement of conformity with both IFRS Accounting Standards and the jurisdiction's own GAAP, is not allowed.
The Foundation's jurisdiction page for Kenya shows how Kenya uses IFRS Accounting Standards and the IFRS for SMEs Standard, with ICPAK as the relevant authority.
Which framework the statement should name
The profile also sets out who uses which framework:
| Entity | Framework, per the profile |
|---|---|
| Companies whose securities trade in a public market | Full IFRS Standards, also required by the Nairobi Securities Exchange listing rules |
| Entities ICPAK designates as publicly accountable, such as those whose debt or equity trades or is being issued for trading in a public market, or that hold assets in a fiduciary capacity for a broad group of outsiders as a primary business | Full IFRS Standards; they cannot use the IFRS for SMEs Standard |
| Entities that are not publicly accountable and prepare general purpose financial statements | Either the IFRS for SMEs Standard or full IFRS Standards |
The profile adds that IFRS requirements also appear in rules of the Central Bank of Kenya, the IRA, the CMA and the Retirement Benefits Authority. For a client in one of those sectors, check the sector rules as well. The choice for smaller private entities is explored in choosing a financial reporting framework for Kenyan SMEs.
Wording the basis of preparation
A clear basis of preparation note does three things:
- Names one framework, exactly. "Prepared in accordance with IFRS Standards" or "prepared in accordance with the IFRS for SMEs Standard". Not both, and not a local-GAAP hybrid.
- Matches what was applied. If the statements use IFRS for SMEs measurement throughout, do not describe them as full IFRS.
- Sits beside the legal basis. For a Kenyan company, many basis notes also refer to the Companies Act, 2015. The two references do different jobs: one names the accounting framework, the other the statute under which the statements are prepared.
No dual reporting
The rule against dual reporting is easy to break by accident. A phrase such as "in accordance with IFRS and Kenyan generally accepted accounting practice" describes two frameworks. Under the profile's description, that is the kind of statement Kenya does not allow. Pick the framework and name it alone.
Naming IFRS for SMEs correctly
Where a client uses the IFRS for SMEs Standard, say so by name. Statements that describe themselves as "IFRS" without qualification, while using the SME standard's simplifications, mislead the reader about what was applied. The same care applies to the policies note: policies should describe the SME standard's treatments, not full IFRS ones. Knowing which standards and amendments are effective for the period is part of the same exercise; see IFRS effective dates for Kenyan reporters.
What the auditor's report says
Because the profile allows the conformity statement to sit in the auditor's report, the basis note, or both, the two documents must agree. The auditor's opinion names the framework against which the statements are assessed, and that framework must be the one the basis note names.
A mismatch, such as a basis note citing IFRS for SMEs and an opinion citing IFRS Standards, is a signal that one of them was copied from another file. How Kenyan audit reports are worded more generally is covered in audit report wording for Nigeria and Kenya.
Basis wording in Achekam
In Achekam, the statements Studio builds a draft set of annual financial statements from a mapped trial balance, with every figure calculated in code. The draft includes the directors' report, the four primary statements, policies, notes and a detailed income statement. The practitioner's report follows the level chosen: audit, independent review, compilation or none. Any block a person has edited is kept when the draft is rebuilt.
That last point matters for the basis note. Once the preparer has written the framework statement for the client, it survives later trial balance updates, so the wording is set once and reviewed, not retyped each time.
For a Kenyan audit engagement, the audit report draft uses Kenyan legal wording, citing the Companies Act 2015, and the partner owns the final text. The partner should therefore check the framework named in the opinion against the basis note in the statements before approving either.
Reviewer checks before issue
- The basis note names exactly one framework, with no dual reporting.
- The framework named is one the entity is permitted to use, per the profile and any sector rules.
- The policies note describes treatments from that framework.
- The auditor's or practitioner's report names the same framework as the basis note.
- The legal basis reference is present and correct.
- Any edited basis paragraph in the Studio was reviewed after the last rebuild.
One sentence, checked twice
Add a single line to the firm's review checklist: "Framework named in the basis note matches the framework in the report." It is a small step that catches the error that is most embarrassing to correct after issue.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
