ABSTRACT
This research study borders on accessing the relationship between IFRS and financial reporting of companies. The research started by examining the historical background of IFRS and financial reporting as well as discussing other authors’ view on various topics related to the issue. Data were collected from both primary and secondary sources. The relevant data collected were analyzed and tested using simple percentages, tables and charts. Subsequently, the two hypotheses were tested using Regression Analysis and Pearson’s Correlation Coefficients through the use of Statistical Packages for Social Science. The result of the analysis revealed that there is a significant relationship between IFRS and financial reporting of companies in Nigeria and that IFRS adoption has increased the level of confidence of global investors and investment analysts in the financial statements of companies in Nigeria. The findings from the research work also revealed that IFRS serves as effective tool for enhancing comparability and interpretation of financial statements of the companies. The study concluded that despite the challenges associated with adopting IFRS such as its complexity of conversion, lack of sound ethical environment and IFRS trained Accountants; IFRS is still a great catalyst for enhancing and boosting financial reporting of companies. Finally, the study recommends that for a successful adoption of IFRS in Nigeria, the government and the relevant authorities should improve upon the training of professionals, provide more funds for conversion and enable a sound ethical environment and corporate transparency.
BACKGROUND TO THE STUDY
............ Financial reporting is an important aspect in every business enterprise and company. It involves a process of formally recording the company’s financial activities with the use of financial reports or statements, which includes all the relevant financial information. These statements apart from providing information about the financial position also provide information as to the level of income, financial position, changes in equity and cash flows of these enterprises that is useful to a wide range of users in making economic decisions.
For the preparation and usage of these financial statements, some accounting standards have been put in place and are often reviewed by the appropriate standard-setting body locally and internationally (Robert O., 2009). The Nigerian Accounting Standards Board (NASB), now Financial Reporting Council of Nigeria (FRCN), issues these standards in Nigeria. The standards issued by the NASB are known as Statements of Accounting Standards (SAS) while the International Accounting Standards Board (IASB) – formerly International Accounting Standards Committee (IASC), issues them at the international level. The standards issued by the IASB are referred to as International Financial Accounting Standards (IFRS).
In 1973, the International Accounting Standards Committee (IASC) was established as an independent, private sector body to set acceptable and applicable standards for the preparers and users of financial statements around the world. During the period from 1997-1999, a restructuring program was implemented which resulted in the cessation and its replacement by a new IASC with effect from 1st April 2001 with two main organs- The Trustees and IASB (Robert, 2009).
The increasing growth in international trade and investment in which most of these companies are unavoidably in has brought to the fore the craze for adoption of International Financial Reporting Standards (IFRS) by both the developed and developing countries. A number of African countries including Nigeria, Ghana, Sierra Leone, South Africa, Kenya, Zimbabwe, and Tunisia among others have adopted or declared intentions to adopt the standard. This is a welcome development considering the fact that the quality of financial reporting is essential to the needs of users who require useful accounting information for investment and other decision-making purposes (Owolabi & Iyoha, 2011)
Information emanating from financial reporting is regarded as useful when it faithfully represents the ‘economic substance’ of an organisation in terms of relevance, reliability and comparability (Spiceland et al., 2001).
In an environment of quality financial reporting therefore, there are no deferral of loss recognition, extra reserves are not created and volatility in income is not smoothed away to create an artificial and misleading picture of steady and consistent growth. It is in recognition of the need to have quality financial reports that the adoption of IFRS is becoming the vogue among countries. The process of adoption received a significant boost when in 2002 the European Union (EU) adopted a regulation requiring public companies to convert to IFRSs beginning in 2005.
Most companies have significant international operations, multiple regulatory and capital market considerations, complex organizational structures (often including multiple subsidiaries and joint venture relationships), and global competitors who already are reporting under IFRS. Also, some of these companies are listed on other stock exchange markets outside Nigeria which requires reporting under IFRS. The companies in these circumstances have discovered compelling reasons to adopt IFRS even before it was mandated, more so when one considers the huge impact made by the income from foreign activities in Nigeria’s GDP and foreign exchange earnings.
Therefore, since the importance of the International financial reporting standards cannot be over-emphasized, this prompted the researcher’s interest to assess the perceived relationship between these standards and overall financial reporting of companies .........
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TABLE OF CONTENT
CHAPTER ONEINTRODUCTION
1.1 BACKGROUND TO THE STUDY 1
1.2 STATEMENT OF THE PROBLEM 4
1.3 OBJECTIVES OF THE STUDY 7
1.4 RESEARCH QUESTIONS 8
1.5 RESEARCH HYPOTHESES 9
1.6 SIGNIFICANCE OF THE STUDY 9
1.7 SCOPE AND LIMITATION OF THE STUDY 10
CHAPTER TWO
LITERATURE REVIEW
2.0 INTRODUCTION 12
2.1.1 CONCEPT OF FINANCIAL REPORTING 14
2.1.2 PURPOSE OF FINANCIAL REPORTS BY BUSINESS ENTITIES 16
2.1.3 RATIONALE FOR ADOPTING IFRS 17
2.1.4 BENEFITS OF IFRS ADOPTION 22
2.1.5 IFRS AND ACCOUNTING QUALITY 24
2.1.6 CHALLENGES OF IFRS ADOPTION 27
2.1.7 FINANCIAL STATEMENT REPORTING REQUIREMENTS OF IFRS 32
2.1.8 THE FIVE STAGES INVOLVED IN IFRS ADOPTION 34
2.1.9 INSTITUTIONAL AND INFRASTRUCTURAL/LEGAL
REQUIREMENTS FOR FINANCIAL REPORTING IN NIGERIA 37
2.1.9.1 ACCOUNTANCY BODIES (ICAN AND ANAN) 38
2.1.9.2 CENTRAL BANK OF NIGERIA (CBN) 39
2.1.9.3 SECURITIES AND EXCHANGE COMMISSION 40
2.1.9.4 NIGERIAN ACCOUNTING STANDARDS BOARD 41
2.1.9.5 NATIONAL INSURANCE COMMISSION (NAICOM) 41
2.2 REVIEW OF EMPIRICAL LITERATURE 42
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION 48
3.1 RESEARCH DESIGN 48
3.2 POPULATION DESCRIPTION 49
3.3 SAMPLE AND SAMPLING TECHNIQUE 50
3.4 SOURCES OF DATA 50
3.5 METHOD AND INSTRUMENT OF DATA COLLECTION 51
3.6 METHOD OF DATA ANALYSIS 53
3.6.1 REGRESSION ANALYSIS 53
3.6.2 PEARSON PRODUCT- MOMENT CORRELATION CO-EFFICIENT 54
3.7 VALIDITY AND RELIABILITY OF THE RESEARCH INSTRUMENT 55
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.0 INTRODUCTION 56
4.1 PRESENTATION, ANALYSIS AND INTERPRETATION 56
4.1.1 DISTRIBUTION AND RETURN OF QUESTIONNAIRES 57
4.1.2 RESPONSES TO QUESTIONS IN SECTION A: 59
4.1.4 ANALYSIS USING SECONDARY SOURCES OF DATA 75
4.2 DATA ANALYSIS AND HYPOTHESIS TESTING 78
4.3 DISCUSSION OF FINDINGS 81
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.0 INTRODUCTION 83
5.1 SUMMARY 83
5.2 CONCLUSION 85
5.3 RECOMMENDATIONS 86
BIBLIOGRAPHY 88
APPENDIX 93
Reference code: C082
Reference code: C082
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