International Financial Reporting Standards (IFRS) have been adopted by 143 countries around thernworld. The goals of the IFRS is to develop, in the public interest, a single set of high-quality,rnunderstandable, enforceable and globally accepted financial reporting standards based upon clearlyrnarticulated principles. However, its adoption and implementation bring opportunities and creaternchallenges to the adopter. The main objective of this study was to assess the adoption, challenges andrnimpact of international financial reporting standards (IFRS) on the quality of financial reporting ofrnfinancial institution in Addis Ababa to provide an input for financial institution, governmental andrnpolicy makers and serve as for future researches on this field of study. Both primary and secondaryrnsources of data have been used for the study from 32 financial institutions. Primary data were collectedrnthrough pre designed questioners whereas secondary data were collected from different governmentalrnorganization reports, scientific papers and proceedings relevant to the study using document andrnregression analysis techniques, and proclamations and regulations that deal with financial reportingrnissues in Ethiopia. The study found that some financial institutions in Addis Ababa, Ethiopia havernstarted using IFRS voluntarily for the preparation of their financial statements without makingrnnecessary awareness but nationally; IFRS is adopted officially in December 5, 2014 through enactmentrnof Proclamation. And from the analysis of survey that in the dependent and independent variables therernis significant correlation. Among those the IFRS on the quality of financial reporting has significantrncorrelation with the transparency, accountability and economic efficiency. The result of the study willrnprovide a good lesson for other Financial Institution, Governmental and Policy Makers for thernimplementation of IFRS network.rnKey Words: IFRS, Adoption; Benefits; Challenge; Quality; Transparency, Financial institutions