Accounting Standards and Their Impact on Accounting Practice in Nigeria
Chapter One
Objective of the Study
- To determine whether poor management affects the users of financial statements such as accountants investors, and bankers.
- To handout whether investor analyze the financial statement before making investment decision.
- To know the need of preparing the financial statement of the company.
- To make a recommendation based on the finding.
CHAPTER TWO
REVIEW OF RELEVANT LITERATURE
International Financial Reporting Standards (IFRS) are 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 and Vanstraelen, 2005). Thus, failure on the part of the firm to apply the requirements of IFRS would result in inconsistencies, lack of accountability and transparency, distortion in financial reports, which in turn results into poor financial reporting practices and dissemination of accounting information that is of less value to any particular group of users. This is because the preparation and presentation of financial statements will be bereft of objectivity, reliability, credibility and comparability, and thus results in fraudulent business practices which subsequently lead to business failure and become devastating on the national economy (Atu et al., 2014).
Amongst other things, the increasing internationalisation of the standardization of accounting rules has helped to reduce wide judgmental intuition and discretion, which has reduced the work of the external auditor considerably (Porwal, 2006). It also allows for a considerable level of consistency in the application of accounting policies, which has helped to strengthen comparability financial reports the world over. The standard setting process has helped to provoke a high level of research and discussion among members of the profession and this has awakened the profession from its slumber.
It is worthy of note that financial reporting pundits are unanimous in their agreement that financial reporting practice of a country depends on several factors that include the legal, economic, cultural and historical background of a country. It could then be argued that financial reporting is not an end in its self; rather, it is intended to provide information that is used in making reasoned choices among alternative uses of scarce resources in the conduct of business and economic activities. Therefore, this recognizes the fact that financial reports exist to satisfy the diverse information needs of numerous users such as the investors, management, employees, government, researchers, and so on. The problem is that firms have incentives to withhold or manipulate information in certain situations (poor performance). This is because the publication of such information imposes both direct and indirect cost on the disclosing firm. Besides the cost of collating, processing, communicating and auditing the information to be published, the position of the disclosing firm may be damaged when such information is used by competitors, government agencies, trade unions, clients or suppliers.
The importance of standardisation of accounting rule cannot be over accentuated.
IFRS and Financial Reporting Quality
Empirical studies have investigated the effects of adopting IAS/IFRS in Europe on investors’ perception of accounting quality prior to Regulation 1606/2002, providing evidence in favour of their adoption. By means of disclosure quality scores provided by reputed experts, Daske and Gebhardt (2006) report, for instance, an increase in accounting quality for a sample of Austrian, German, and Swiss firms switching to IAS/IFRS in the period prior to their mandatory adoption in Europe. Similar results are provided by value-relevance studies such as the ones by Bartov et al. (2005), which document an increase in the value-relevance of earnings for German firms adopting IAS/IFRS. Barth et al. (2008) also compare domestic GAAP and IAS/IFRS across 21 countries, suggesting that firms applying IAS/IFRS exhibit less earnings management, more timely loss recognition, and more value-relevant accounting measures.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
This chapter discusses the materials, method and procedures employed by the researcher for relevant data collection and analysis for the research study. It deals with the way and manner of gathering information that would lead to the possible solution to the research questions.
RESEARCH DESIGN
According to Asika(2009), Research design means the structuring of investigation aimed at identifying variables and their relationships to one another. This is used for the purpose of containing data to enable the researcher test hypotheses or answer research questions. It also serves as a guide to a researcher through the various stages of research.
POPULATION/SAMPLE SIZE OF THE STUDY
The population of this study are public liability companies including Banks. A sample of 14 banks out of 21 operating banks in Nigeria (CreditRiskMonitor.Com 2014) is drawn randomly from different industries using the grouping of the Nigeria Stock Exchange presented below:
Banks – Access Bank, Diamond Bank, Ecobank, Fidelity Bank, First Bank Nigeria Limited, FCMB, GTBank, Sterling Bank Union Bank Plc UBA Plc Unity Bank Plc Wema Bank Plc.
Conversely, an index that is lower than one suggests that the Nigerian Banks’ total assets, total liabilities and total equities are lower than that what were reported under
IAS/IFRS. For the computed comparability indexes, see table 1, 2 & 3 below
CHAPTER FOUR
DATA ANALYES AND RESULTS
This section analyses the data collected. Descriptive and inferential statistical techniques were employed to carry out the analyses. The descriptive statistics, particularly the mean, were used to gain an insight into the nature of distribution of the data. The inferential statistics of one sample t-test, on the other hand, is employed to test the formulated hypothesis.
CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
The importance of international financial reporting standards to financial reporting practice cannot be over emphasized. Members of the international community are interested in financial reports that have been prepared on the basis of IAS/IFRS, thereby help in attracting foreign direct investments. Other benefits derivable from the adoption of IFRS include: imposition of a more comprehensive and highly detailed set of disclosure requirements than domestic accounting standards; constrain managerial discretion, improvement in accounting quality, which in turn contributes to a generally transparent firm information environment and better accounting practice. Improved comparability is also one of the value-adding characteristics of IFRS as contended by most financial reporting pundits, as it will make it less costly for investors to compare and evaluate firms inside and outside industries and countries.
There are however some arguments against why IFRS adoption may not have a beneficially meaningful impact on financial markets, financial institutions, investors and other users of accounting information. First, financial reporting is shaped by incentives. Incentives, in turn, are influenced by the institutional structures in place. For instance, a strong investor protection regime supports a higher level of financial development with deep and liquid equity and debt markets. In such an environment, firms are not unwilling to provide greater information since it allows them to access lower cost external financing. Based on the above findings, this study concludes that IFRS has impacted on the financial reporting practices in the Nigeria Banking sector.
RECOMMENDATIONS
In order to deepen transparent financial reporting practices in the Nigerian Banking sector, sequel to the adoption of IFRS, this study offers the following recommendations:
n Strengthen the financial reporting institutional framework by further empowering the Financial Reporting Council of Nigeria. In this regard, the paper argues that one way of invigorating and empowering the Council is by making it self-sufficient in terms of funding. This will surely engender financial autonomy on the part of this regulator and avoid a situation where the regulator gets its finances from the entities it is suppose to regulate, as it was the case during the era of the defunct Nigerian Accounting Standard Board (NASB).
n Membership of the Financial Reporting Council should be widened in order to increase its influence beyond the financial sector of the Nigerian economy.
n The Financial Reporting Council in conjunction with various professional bodies should place more premium on continuing professional education and training. As much as possible, the professional accountancy bodies should align their continuing professional education requirements with IFAC guidelines.
REFERENCES
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