The Effect of Accounting Standards on the Quality of Financial Reporting in Nigeria

The Effect of Accounting Standards on the Quality of Financial Reporting in Nigeria

Chapter One

Objectives of the Study

The broad objective of this study is to ascertain the effect of accounting standards on the quality of financial reporting in Nigeria. To following are the sub-objectives;

1. To determine the effect of financial accounting standards on the quality of financial reporting in Nigeria.
2. To ascertain if accounting standards are effective in business enterprises.
3. To ascertain the problems encountered in the application of accounting standards.

CHAPTER TWO

REVIEW OF RELATED LITERATURE

Introduction

International Financial Reporting Standard (IFRS) are standards, interpretation and the framework adopted by International Accounting Standards Board; International Financial Reporting Standards are products of private sector initiatives towards the harmonization and internationalization of financial reporting in response to the demands of business globalization and regional convergence. The International Accounting Standards Committee (IASC) is a body of professional accounting bodies of independent countries, formed in June 1973 by the International Federation Of Accounting, produced the first set of international standards known as the International Accounting Standard (IAS) between 1973 and 2001, (Benson 1976). The IASB after the change in 2007 from IASC published its standard in a series of pronouncements called the International Financial Reporting Standards (IFRS). The IASB also adopted the body of standards issued by IASC, and those standards continue to be designated “International Accounting Standards (IAS)”. IFRS are a single set of high quality, understandable standards for general purpose financial reporting which are principles-based in contrast to the rule based approach. IFRS comprise of four types of documents, viz: IAS (41); IFRSs (18); the Standing Interpretation Committee Statements, SICS (II); and the International Financial Reporting Issues Committee Statements, IFRICS (18), (Azobu, 2010). IFRSs are designed to encourage professional judgment and discourage over reliance on detailed rules (Doubnik & Perero, 2007). The adoption and implementation of International Accounting Standards were more through persuasion and never mandatory on any country’s professional accountancy bodies who are members of these board. These standards have the problem of automatic adoption and by all countries on account of differences in background and tradition of countries, differences in the needs of, and by various economic environment and the perceived challenges to sovereignty of states and enforcing standards (Frank, 1971).

HISTORICAL BACKGROUND OF IFRS

The move towards developing an acceptable global high-quality financial reporting Standards started in 1973 when the International Accounting Standards Committee (IASC) was formed by 16 professional accounting bodies from Canada, United States of America, United Kingdom, Germany, France, Netherlands, Australia, Mexico and Japan. The IASC was recognized into the International Accounting Standards Boards (IASB) in 2001. To date, the IASB has developed accounting standards and related Interpretations that are collectively known as the International Financial Reporting Standards (IFRS). According to (Adam, 2009), the standards set by the IASB began to gain dominance when International Organization of Securities Commissions (IOSCO) in 2000 endorsed the then IASC standards.

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CHAPTER THREE

RESEARCH METHODOLOGY

Research design

The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to examine the effect of accounting standards on the quality of financial reporting in Nigeria.

Sources of data collection

Data were collected from two main sources namely:

(i)Primary source and

(ii)Secondary source

Primary source:

These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.

Secondary source:

These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.

Population of the study

Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information for the study the effect of accounting standards on the quality of financial reporting in Nigeria.  200 staff of first bank of Nigeria plc. was selected randomly by the researcher as the population of the study.

CHAPTER FOUR

PRESENTATION ANALYSIS INTERPRETATION OF DATA

Introduction

Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey.  This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

 Introduction

It is important to ascertain that the objective of this study was to ascertain the effect of accounting standards on the quality of financial reporting in Nigeria.

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 the challenges of accounting standard and quality financial reporting in Nigeria.

Summary

The research work was carried out with the objective of unraveling the benefits Nigerian companies stand to achieve by the adoption and implementation of the International Financial Reporting Standards in preparing and reporting its financial statements. To this effect, two hypotheses were assumed and tested, so that it can be accepted or rejected at the end of the research work when it will be analyzed using questionnaire to obtain data from chartered accountants, auditors, managers, investors in Jos North Local Government of Plateau State.

The outcome of the study revealed the following:

1. The adoption will increase the level of confidence of global investors and investment analysts in the financial statements of companies in Nigeria.
2. The adoption of IFRS is an effective tool for enhancing the uniformity and comparability of financial statements of companies in Nigeria.
3. The companies that have adopted IFRS will be able to generate more funds from foreign sources.
4. There are still challenges militating against the successful adoption and implementation of IFRS but government has put adequate measures in place to address these issues.
5. The adoption and implementation of IFRS will increase the FDI inflow in Nigeria.

CONCLUSION

In this study, attempts were made to assess the relevance of IFRS in the preparation and presentation of financial statements in Nigeria.  Based on the findings, it was concluded that adoption of IFRS is a right step in the right direction which actually has been more relevant in the preparation and presentation of financial statements in the Nigerian. Although, there are many issues and challenges facing implementation, the benefits outweigh the challenge. With adoption, Nigerian Companies will produce more credible financial statements that will not only be informed but also provide a basis for better interpretation. This invariably will boost investors’ confidence and attract cross border financial transactions which is the basis for economic growth.

RECOMMENDATIONS

Abstracting from the above mentioned, the research makes the following recommendation to ensure a successful adoption and implementation of IFRS in Nigeria.

1. Government and the regulators should ensure that there is availability of training facilities and materials for  Professional  Accountants  on    the  concept  of  IFRS  and  issues  relating  to  its  implementation conversion
2. Compliance with IFRS timetable should be mandatory and failure should be marched with appropriate sanctions.
3. Government should release more fund to FRC to educate all stakeholders with special reference to the academic, staff and accounting students who will uphold the future of IFRS in the country and developing a plan to help properly equip the company for upcoming changes
4. Professional accounting bodies in Nigeria should made IFRS training a part of MCPE at a reduce cost.
5. While monitoring the IFRS implementation timetable, the government, the Central bank of Nigeria and other regulatory bodies should ensure that ethical environment and corporate transparency are observed.

REFERENCES

• Abdullah, S. N. (2006). Board Composition, Audit Committee and Timeliness of Corporate Financial Reports in Malaysia. Corporate Ownership and Control, 4(2): 33-45.
• Adam, M. (2009). The chalanges of Adopting International Financial Reporting Standards, Zenith Economic Quarterly Vol. 4. Nigerian Banks, pp. Pp 17 – 26.
• Adams, P. (2004, August 2). Resolving Conflicts in Accounting System. Issues and Arguments, pp. 12 – 13. 
• Adejola, P. A. (2012). International Public Sector Accounting Standards. (1st Ed.). Abuja: Rainbow Graphics Printers & Publishers. 
• Adekoya, O. (2011). Similarities and Differences Between IFRS and Nigerian GAAP Lagos: Price water House Coopers International Limited.
• Ahmad, Z. (2011). An Essential Course for Getting to KNOW IFRS. Chartered Accountant and Entop Consulting Ltd UK.
• Ahmed, A. (2003). Bank Loan Loss Provisions: A Re-examination of Capital Management, Earnings Management, and Signaling Effects. Journals of Accounting and Economics, 28(1), 1-25.
• Akhidime, A. E. (2010). The Adoption and implement of International Accounting Financial Reporting Standards (IFRSS): Evaluation of the Roles of Key Stakeholders in Nigeria. AAU JMS Vol. 1, No. 1, December 2011.
• Akinyemi, O. A. (2012). The Impact of International Financial Reporting Standards adoption on Financial Statements. Lagos: Feb Publishers.
• Alp, A., & Ustuntag, S. (2009). Financial Reporting Transformation. The Experience of Turkey. Critical Perspective on Accounting, 20, 680 – 699.
• Armstrong, C. Barth, M. E. Jagolinzer, A. & Riedl, E. J. (2008, June). Market Reaction to the Adoption of IFRS in Europe. Retrieved July 10^th, 2010, from Stanford University:

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