The impact of IFRS on financial statements: Analysis of the banking sector in Bosnia and Herzegovina

The adoption of International Financial Reporting Standards (IFRS) has emerged as a transformative phenomenon in the global accounting world. These standards shape financial reporting practices and promote harmonization among economies. This research aims to examine how the implementation of IFRS has affected the financial statements of banks operating in Bosnia and Herzegovina. Through a comprehensive analysis of financial data, the study investigates the consequences of transitioning from national accounting standards to IFRS in a rapidly changing economic context. The research begins by reviewing existing studies on the implementation of IFRS in Bosnia and Herzegovina, outlining the sector's status, and presenting the accounting framework in the country. This background provides significant insights into Bosnia and Herzegovina's commitment to international reporting standards, forming the basis of the research on the application of IFRS in the country. The examination of the regulatory framework and analysis of the reasons for adoption offer crucial information regarding the country's commitment to international reporting standards. To analyze the financial statements of banks in Bosnia and Herzegovina, the research utilizes the Altman Z-Score, the Fulmer H-Score and the Springate S-Score models determining financial performance indicators before and after the transition to IFRS. The results obtained from examining the financial statements and all the Altman Z-Score, the Fulmer H-Score and the Springate S-Score coefficients indicate that the transition to IFRS did not significantly alter the financial ratios in the banking sector. Nevertheless, the results from the three models collectively indicate that there hasn't been a noteworthy upturn in the financial indicators of the analyzed banks. This suggests that the adoption of IFRS did not yield a substantial enhancement in the financial standing of Bosnian banks, as evidenced by the absence of favorable shifts in the Altman Z-Score, Fulmer H-Score, and Springate S-Score metrics. The constancy observed in the financial ratios derived from the annual reports of Bosnian banks may stem from the harmonization of Bosnia's domestic standards with IFRS or the adoption of similar practices.