Impact of IFRS Adoption on Labour Mobility of Private Accountants in Nigerian Banks: a Case Study of First Bank of Nigeria Plc, Aba, Abia State
Chapter One
OBJECTIVE OF THE STUDY
The purpose of this study is to empirically examine whether the mandatory adoption of IFRS has improved the value relevance of financial information in the financial statements of First Banks in Nigeria. Specifically, the objectives of the study are to compare the value relevance of book value of equity and earnings in determining the share price of First Bank in Nigeria before and after the mandatory adoption of IFRS. However, the objectives of the study are to find out the following:
- To examine the impact of IFRS on quality and labour mobility of private Accountants in First Bank of Nigeria Plc.
- To examine whether the International Financial Reporting Standards (IFRS) in Nigeria has improved the quality of financial reporting in First Bank of Nigeria Plc.
- To find out the role of IFRS play in banking institutions in Nigeria.
- To determine whether IFRS adopted implementation has been made positive impact in Nigeria.
- To find out the problems confronting the staff of First Bank of Nigeria Plc in adopting IFRS into system.
- To make useful recommendation based on the findings of the study.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Concept of International Financial Reporting Standards (IFRS)
The practice of accounting all over the world is guided by sets of guidelines, principles or rules. These rules and guidelines are compiled into accounting standards upon which the accounting practices are based. They are statements of principle that discusses the accounting treatments and disclosure of a particular item or group of items (Adebimpo & Ekwere, 2015). International financial reporting standards (IFRS) is a body of prescriptive rules and guidelines with global reach and appeal which provide direction and guidance on how business enterprises in a globalised world could achieve the goal of proper record keeping, transparency, uniformity, comparability and enhancing public confidence in financial reporting (Tendeloo & Vanstraelen, 2005). Maclas and Muino (2011) suggested the problem of financial reporting quality in the accounting information of some European countries that operate two different national and international accounting systems. Atwood et al. (2011) found that accounting information presented according to generally accepted accounting principles was more successful in the predictability dimension than information resented according to the International Financial Reporting Standards (IFRS) system. Therefore, the international financial reporting standards (IFRS) is said to bridge the regional gaps experienced in the national accounting and financial reporting often seen in the general accepted accounting practices (GAAP). The generally accepted accounting practice (GAAP) was characterized with regional sectional discrepancies which impinged on free cross border financial reporting. According to Anthony and Young (2010) generally accepted accounting practices (GAAP) used initially for accounting and financial reporting gives way to differences in businesses communication and reporting of financial information across different countries and firms around the world
Adoption of IFRS in Nigeria
The Nigerian Federal Executive Council adjusted to the convergence of accounting standards in Nigeria with International Financial Reporting Standards (IFRS) in early 2012. The Central Bank of Nigeria (CBN) and the Nigerian Securities and Exchange Commission (SEC) support the migration to IFRS. The Council has directed the Nigerian Accounting Standards Board (NASB), under the supervision of the Nigerian Federal Ministry of Commerce and Industry, to take further necessary actions to give effect to Councils’ approval. The intensification of globalization and the consequential loss of national identity in financial reporting standards in Nigeria encourages Nigerian Accounting Standards Board (NASB) to key into the International Financial Reporting Standards. Therefore, Financial Reporting Council was formed and backed by law to issue standards, regulate accounting, actuarial, valuation and auditing standards of the country Consequently, the adoption of IFRS was launched in September 2010.The adoption was structured in such a way that all stakeholders will use the IFRS by January 2014. The adoption was scheduled to start with Public Listed Entities and Significant Public Interest Entities who were expected to adopt the IFRS by January 2012. Also, it was mandatory for all other Public Interest Entities to adopt the IFRS for statutory purposes by January 2013. Besides, Small and Medium-sized Entities (SMEs) were also mandated to adopt IFRS by January 2014. (www.iasplus.com/en/jurisdictions/africa/nigeria).
The Most Urgent and Important Changes
Submission of the financial report: along with the International Accounting Standard (IAS 1: “Presentation of Financial Statements”), the IFRS for small and medium-size businesses requires that in the financial statement there is at least one period for the comparable information. Meanwhile, under complete IFRS, the financial statement containing the financial standing, profit-loss, total income, cash flow reports and the one concerning changes in own capital is to reflect information regarding two reporting dates. Besides, instead of the total income report and two reports on undistributed profit, the small and medium-size businesses can now present a consolidated report on total income and undistributed profit. However, it is only possible when changes in the capital during the reporting period resulted from only profit or loss, dividend payment, adjustments made in the passed periods and changes in the accounting policy. Combined financial statement: another innovation in the IFRS for small and medium-size businesses is the concept of the combined financial statement, which is a combination of the statements drafted by legally unrelated enterprises (the so-called informal holding) owned by a single entity (PWC, 2013). The combined financial statement is a single financial report drafted by two or more businesses controlled by the same investor. Under the IFRS for small and medium-size businesses, drafting the combined financial statement, which relies on the guidelines of consolidation, is not mandatory. Enterprises may draft the statement as required, for instance, for initial appraisal of their consolidated report prior to merger or assessment of efficiency of the holding group and, also, forecasting. It should be said that the combined financial statement is not the consolidated report of the group as it is described in IAS 27: “Consolidated and Separate Financial Statements” and, therefore, it does not meet the requirements of the Stock Exchange. Consequently, although the structure of the small and medium-size businesses differs from that of a holding, the IFRS designed for them came up as a major incentive for their development. They are now free to decide, which enterprises could be consolidated under a single investor control. It is up to the auditor’s professional judgment to define whether the consolidation perimeter is wrong and in case of high risk, take preventive measures (SergeyModerov, 2009). The combined report of a business group is to disclosure all the business-related risks and benefits and not only those that the Management would like to reveal. Fixed assets: they are accounted by the prime cost and depreciation model. As to the revaluation model, it may be applied only by means of the capital. Depreciation to the component is charged only when the main part of the asset assigned to fixed assets differs in terms of “Different Models of Utilization of the Economic Benefit” Bdo. Ifrs for Smes at a Glance (2015). The term, residual value and depreciation rate of the fixed assets are to be revised in case of major changes to the asset or its utilization (and not annually). Investment assets: by application of the prime cost model, the investment assets are accounted as fixed assets, if reliable assessment of the actual value of the assets is impossible. The loan consumption costs are acknowledged as costs and are never capitalized. State grant: if all the grant conditions are met, a state grant is acknowledged as income. If the grant is given prior to fulfillment of its conditions, it is acknowledged as a liability. As against the complete IFRS according to which the asset-related grants in the statements are specified as income or by way of reduction of the value of the acquired /self-produced assets, the IFRS for small and medium-size businesses prescribes uniform itemization of the state grants. The small and medium-size businesses are to record grants as income and acknowledge the State-provided asset at its real value. Intangible assets: the intangible assets are accounted by the prime cost model. The reevaluation model cannot be applied. The development work costs are to be acknowledged as the period cost and cannot be capitalized. The intangible assets have a definite useful life and when its reliable determination is impossible, the useful life expectancy shall not be over 10 years. Consolidation of enterprises and Goodwill (Ernst & Yang, 2010): the purchase method is applied; all the costs directly incurred for the sake of consolidation of enterprises are capitalized and cannot be acknowledged as costs. The Goodwill is amortized but if an enterprise is unable to accurately determine the useful life of its Goodwill, it shall be defined as 10 years. Special activities: if the real value cannot be determined without extra costs and efforts, in agriculture they apply the historical cost model. In oil and gas production and mining the prospecting costs may not be itemized as expenditure. Financial instruments: regarding the financial instruments – the most complex part of the international standards, the IFRS for small and medium-size businesses suggests that we rely either on section 11: “Basic Financial Instruments” or section 12: “Additional Financial Instruments Issues” or complete IFRS 39:
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine Impact of IFRS adoption on labour mobility of private accountants in Nigerian banks. Staffs of First bank of Nigeria PLC, Aba, Abia state form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was on impact of IFRS adoption on labour mobility of private accountants in Nigerian banks: a case study of First bank of Nigeria PLC, Aba, Abia state. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing Impact of IFRS adoption on labour mobility of private accountants in Nigerian banks
Summary
This study was on Impact of IFRS adoption on labour mobility of private accountants in Nigerian banks: a case study of First bank of Nigeria PLC, Aba, Abia state. Sex objectives were raised which included: To examine the impact of IFRS on quality and labour mobility of private Accountants in First Bank of Nigeria Plc, to examine whether the International Financial Reporting Standards (IFRS) in Nigeria has improved the quality of financial reporting in First Bank of Nigeria Plc, to find out the role of IFRS play in banking institutions in Nigeria, to determine whether IFRS adopted implementation has been made positive impact in Nigeria, to find out the problems confronting the staff of First Bank of Nigeria Plc in adopting IFRS into system and to make useful recommendation based on the findings of the study.. The study adopted a survey research design and conveniently enrolled 80 participants in the study. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from staffs of first bank. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
The research target was to examine Impact of IFRS adoption on labour mobility of private accountants in Nigerian banks: a case study of First bank of Nigeria PLC, Aba, Abia state. The result revealed that there is a positive and significant effect of the adoption of international financial reporting standards (IFRS) on financial reporting quality of first bank. This is because all the indicators of international financial reporting standards (IFRS) and Financial Reporting Quality (FRQ) revealed a high extent of considerable impact both when they are considered as a single (univariate) and bivariate variables. However, the findings of the results of the analysis confirmed other related studies for example Zaiyol, Nwakaeze (2010), Uzoigwe (2012), Onipe, Musa and Isah (2015) and Andrew and Udende (2017).
Recommendation
The Financial Reporting Council (FRC) should ensure uniformity in reporting for companies to benefits from IFRS adoption in Nigeria.
- The regulatory agencies should be provided with the required financial support to enhance reliability of staff when carrying out their regulatory functions to make sure that organizations comply strictly with the adoption of International Financial Reporting Standard (IFRS).
- There is need for government on their own part should ensure that they provide the enabling environment towards ensuring the adoption and practice of International Financial Reporting Standard (IFRS) in Nigeria. This can be done by providing the necessary legislative framework for its adoption and practice of International Financial Reporting Standard (IFRS)
References
- Abata M.A (2015). Impact of IFRS on Financial Reporting Practices in Nigeria (A case of KPMG). Global Journal of Contemporary Research in Accounting, Auditing and Business Ethics (GJCRA).
- Abata, M.A. (2015). Impact of IFRS on Financial Reporting Practices in Nigeria: A case of KPMG. Global Journal of Contemporary Research in Accounting Auditing and business ethics (GJCRA), 1(1), 263-281.
- Abata, M.A. (2015). The impact of International Financial Reporting Standards (IFRS) Adoption on Financial – Reporting Practice in the Nigerian Banking Sector. Journal of Policy and Development studies, 9(2), 170-184.
- Adebimpe O. U & Ekwere R. E(20 15). IFRS Adoption and Value Relevance of Financial Statements of Nigerian Listed Banks. International Journal of Finance and Accounting.
- Adebimpe, O.. & Kwere, R. F. (2015). IFRS Adoption and Value Relevance of Financial Statements of Nigerian Listed Banks. 1ntiiational Journal of finance and Accounting, 4(1), 1-7.
- Adebiyi, C. (2012). Computer Based Accounting system: Concepts, design principles and strategy. Ibadan: Polygraphics Ventures Ltd.
