An Assessment of Public Sector Accounting and Its Impact on Financial Control System in Nigeria
Purpose of the study
The study’s main objective is to determine the impact of IPSAS adoption on the financial control system of public service in Nigeria. Specifically, the study aimed to:
- Determine the impact of IPSAS adoption on the relevance of Book value per share of public service in Nigeria
- Determine the impact of IPSAS adoption on value relevance of earnings per share of public service in Nigeria.
- Investigate the impact of IPSAS adoption on value relevance of capitalized intangible assets of public service in Nigeria
- Determine the incremental impact of IPSAS adoption on relevance of accounting information of listed financial firms in Nigeria
Conceptual framework of IPSAS
The development of the IPSAS has its origin in the accounting progression as a way to improve the transparency and accountability of governments and their agencies by improving and standardizing financial reporting. The IPSAS Board (IPSASB) is an independent standard setting board supported by the International Federation of Accountants (IFAC). The IPSASB issues IPSAS, guidance and other resources for use by the public sector around the world.
The IPSASB (and its predecessor, the IFAC public sector committee) has been developing and issuing accounting standards for the public sector since 1997. As transactions are generally common across both the private and public sector, there has been an attempt to have IPSAS converged with the equivalent International Financial Reporting Standards (IFRS).
The IPSAS are also developed for financial reporting issues that are either not addressed by adopting an IFRS or for which no IFRS has been developed. The IPSASB started out with the conceptual framework of the International Accounting Standards Boards (IASB) and is in the process of developing its own conceptual framework to meet the financial reporting needs of entities in the public sector.
The public sector, for the purpose of IPSAS, refers to national government, regional governments (e.g state, provincial and territorial), local government (e.g town and city), and related government entities (e.g agencies, boards, commissions and enterprises). The IPSAS applied in the preparation of general purpose financial reports that are intended to meet the needs of users who cannot otherwise command reports to meet their specific information needs. IPSAS are aimed for application to the general purpose financial reporting of all public sector entities other than Government Business Enterprises (GBEs). GBEs are expected to apply IFRS.
Countries that have adopted IPSAS
The increasing demand of high quality global financial reporting standards of public entities brought to the fore the craze for adoption of IPSAS by both the developing and developed countries. According to , the countries that have adopted IPSAS are grouped as follows:
Countries that have fully adopted and implemented IPSAS
Abu Dhabi, Albania, Australia, Azerbaijan, Bangladesh, Brazil, Canada, Cayman Islands, Cyprus, Costa Rica, East Timor, Fiji, France, Georgia, Japan, Kazakhstan, Kyrgyzstan, Latvia, Liberia, Lithuania, Malaysia, New Zealand, Nicaragua, Pakistan, Palestine, Philippines, Romania, Russia, Singapore, Slovak Republic,
IPSAS adoption towards transparency and accountability
The global trends of event have informed both the private and public sectors on the need to address matters that bother on Transparency and Accountability. Without doubt transparency and accountability is all about being responsible to those who have invested their trust, confidence and resources to one in assigned position or office. According to Adegite, defined Accountability as the obligation to demonstrate that work has been conducted in accordance with agreed rules and standards and the officers reports fairly and accurately on performance results vis-à-vis mandated roles and plans.
Public accountability is an essential component for the functioning of our political system. Public accountability as the basic tenet of democracy
Similarly, the principle of transparency relates to the openness of government to its citizens. Good governance includes appropriate disclosure of key information to stakeholders so that they have the necessary facts about the government’s performance and operations. Accordingly, the government’s decisions, actions and transactions are conducted in the open. In relating IPSAS adoption on Transparency and accountability, the UNAIDs programme committee board (2013) reported that IPSAS adoption will improve transparency and accountability of the financial report IPSAS are standards of high quality which serve as catalyst for providing sound and transparent financial statements thereby improving operational performance, accountability and fair allocation of resources
IPSAS standards to improve transparency and accountability in government entity’s financial report. The development of the IPSAS has its origins in the accounting profession as a way to enhance the transparency and accountability of governments and their agencies by improving and standardizing financial reporting. Finally, concluded that there are no doubts that applying universal high quality standards can promote efficiency, transparency which in long-run may promote public accountability.
For the purpose of this study, correlation, pre and post research designs are used. The reason for the selection of these designs is; first, correlation, pre and post research designs are sibling of quasi-experimental research design which relate to social science research. And the second, correlation, pre and post research design has the ability of describing the statistical association between the two or more variables and allows for making predictions by testing the expected relationship between variables.For the pre-post design, the period of the study is split in to 4 years each, 2008-2011 and 2012-2015. Therefore, the two research designs are suitable and appropriate for this study.
Population and Sampling Design.
The population of the study comprises all the ministries in the Lagos civil service.
DATA PRESENTATION, ANALYSIS AND DISCUSSION
Table 4.1 presents the descriptive statistics for both pre and post IPSAS compliance, where minimum, maximum, mean and standard deviations of the data for the variables used in the study are presented and discussed.
CONCLUSION AND RECOMMENDATIONS
Based on the discussion and analysis in the preceding chapter, the study concluded that both empirical and statistical evidence on the utility of three explanatory variables of book value, earnings per share and capitalizes intangible in predicting the explained variable (share prices of the sample firm) was provided. Also, it is concluded that even though the adoption of IPSAS was mandated in order to increase financial control system, that mandatory adoption has been proven to enhance the relevance of book value of equity to the users of accounting information of financial service firms in Nigeria through share prices.
Secondly, this study concludes that relevance of IPSASs regarding to earnings per share has been improved after the adoption of IPSAS. This can be further explained by the fact that adoption of IPSAS has not restored the confidence of investors by influencing the share price of financial service firms in Nigeria.
Thirdly, the study provides evidence that value relevance of capitalised intangible assets has been improved after the adoption of IPSAS. This can be explained by the fact that the mandatory adoption has enhanced the investors need by influencing the share price of financial service firm in Nigeria.
Lastly, IPSAS adoption reflect more value relevant information on accounting information which is beyond that of pre IPSAS adoption period through the share prices of public service in Nigeria.
In line with the findings and conclusions of the study the following recommendations are proffered:
- Statistical evidence revealed that book value per share has conveyed useful information to the market share price of the public service after the adoption of IPSAS. Therefore, management should pay more attention to IPSAS by ensure adequate compliance. This can be achieved by strengthening internal control unit in the organization to ensure that every aspect of accounting processes undergone a holistic check of IPSAS compliance checklists. Similarly, potential and existence investors should give priority investment wise, to the company that adopts IPSAS fully as shown statistically that the said standards influence the share prices through book values of equity.
- Statistical evidence proved that capitalized intangible asset has impact on share price of Nigeria public service after IPSAS adoption period. Therefore, management should capitalize their intangible assets because they have significant impact on market share price. Also the Standard setters should therefore ensure adequate adherence to the IAS 38 which prescribe how intangible assets should be capitalized, expensed, amortized or impaired. Managers should ensure that more intangible capital should be present in their financial
- Financial reporting council and other regulatory agency should ensure the strict adherence of IPSAS. Because the adoption of the standard is proved to have an incremental value relevance on accounting information of public service in Nigeria.
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