Abstract:
At present, unit trusts in Sri Lanka are passing through a stage of rapid growth and are
significantly affected by the convergence of local accounting standards with International Financial
Reporting Standards (“IFRS Convergence”) brought to effect from January 2012. Hence, this study
strives to address the research issues: how the stakeholders of Sri Lankan unit trusts who are directly
involved in the preparation of financial reports perceive IFRS Convergence; and the challenges they
face in implementing the changes owing to IFRS Convergence. In order to address this issue, the study
aims to evaluate perceptions of stakeholders directly involved with preparation of financial reports of
unit trusts on IFRS Convergence, and identify and analyse the challenges faced by Sri Lanka‟s unit
trusts in implementing changes arising from IFRS Convergence. The study is conducted in the form of
a descriptive case study – which describes systems, techniques and procedures used in practice –
covering the four stakeholder clusters that are directly involved in the implementation process of
International Financial Reporting Standards in unit trusts; namely, Fund Management Companies
(FMCs), Trustees, the Institute of Chartered Accountants of Sri Lanka (ICASL) and the Securities and
Exchange Commission of Sri Lanka (SEC). When analysing the stakeholder perceptions, the strategic
options evaluation model by Johnson et al. (2008) is used, where the strategy of IFRS Convergence is
evaluated under the three headings; “suitability” to address key issues relating to the existing position
and future direction of the industry/entity; “acceptability” to stakeholders and their expectations; and
“feasibility” to execute using the resources and competencies the industry/entity possesses. The study
uncovers that the Trustees and FMCs who are directly involved in preparing financial statements,
perceive IFRS Convergence to be suitable and acceptable. However Trustees do not regard it feasible,
whereas FMCs remain neutral. The ICASL perceives it to be suitable, acceptable and feasible for the
unit trust industry, reflecting its role as the promulgator of financial reporting standards. Key
implementation challenges faced by FMCs and Trustees are found to be process-related constraints;
knowledge constraints; and time constraints. However, ICASL and SEC are not aware of these
challenges, highlighting the poor communication between stakeholders.
