Changes in Accounting Standards and Its Impact on Financial Statements

Changes in Accounting Standards and Its Impact on Financial Statements

CHAPTER ONE

OBJECTIVES OF THE STUDY

The objective of the study is to find out the following:

Determine the extent to which IFRS adoption has impacted on the comparability quality of financial report of Nigeria banks
Evaluate how IFRS adoption has affected relevance principle of making decision by users of financial report of Nigerian banks
Examine the impact of IFRS adoption on the clarity quality through effective communication in Nigerian banks

CHAPTER TWO

REVIEW OF RELATED LITERATURE

INTRODUCTION

This chapter is on the review of related literature about Financial Reporting Standards with focus on First Bank of Nigeria Plc, Uyo, Akwa Ibom State.

CONCEPTUAL FRAMEWORK

According to Barth et al. (2007:2), the IASB Framework was approved by the IASC Board in April 1989 for publication in July 1989, and adopted by the IASB in April 2001. In September 2010, as part of a bigger project to revise the Framework the IASB revised the objective of general purpose financial reporting and the qualitative characteristics of useful information. The remaining of the document from 1989 remains effective, Ashbaugh and Pincus (2001:422).

This Conceptual Framework sets out the concepts that underlie the preparation and presentation of financial statements for external users.

The Conceptual Framework deals with:

(a) The objective of financial reporting;

(b) The qualitative characteristics of useful financial information;

(d) Concepts of capital and capital maintenance.

The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investment, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling or holding equity and debt instruments, and providing or settling loans and other forms of credit. Many existing and potential investment, lenders and other creditors cannot require reporting entities to provide information directly to them and must rely on general purpose financial reports for much of the financial information they need. Consequently, they are the primary users to whom general purpose financial reports are directed (Barth et al. 2007:6; Chen 2010:226).

General purpose financial reports do not and cannot provide all of the information that existing and potential investment, lenders and other creditors need. Therefore those users need to consider pertinent information from other sources. Other parties, such as regulators and members of the public other than investment, lenders and other creditors, may also find general purpose financial reports useful. However, those reports are not primarily directed to these other groups.

In order to meet their objectives, financial statements are prepared on the accrual basis of accounting. Accrual accounting depicts the effects of transactions and other events and circumstances on a reporting entity’s economic resources and claims in the periods in which those effects occur, even if the resulting cash receipts and payments occur in a different period. This is important because information about a reporting entity’s economic resources and claims and changes in its economic resources and claims during a period provides a better basis for assessing the entity’s past and future performance than information solely about cash receipts and payments during that period, Daske et al. (2007:16).

The financial statements are normally prepared on the assumption that an entity is a going concern and will continue in operation for the foreseeable future.

Qualitative characteristics identify the types of information that are likely to be most useful to the existing and potential investment, lenders and other creditors for making decisions about the reporting entity on the basis of information in its financial report (financial information). If financial information is to be useful, it must be relevant (i.e. must have predictive value and confirmatory value, based on the nature or magnitude, or both, of the item to which the information relates in the context of an individual entity’s financial report) and faithfully represents what it purports to represent (i.e. information must be complete, neutral and free from error).

CHAPTER THREE

RESEARCH METHODOLOGY AND DESIGN PROCEDURE

INTRODUCTION

This chapter is concerned with the presentation of method used in this study to accomplish its purpose on “The Impact of IFRS on Quality of financial statement”. The following areas were taken into consideration, design of the study, area of the study, population of the study, sample size and sampling techniques, research instrument, validation of research instrument, reliability of research instrument, administration of the instrument and method of data analysis.

DESIGN OF THE STUDY

This study adopted survey research design. According to Ekott & Nseyen (2006), a survey research is one in which a group of people or items is studied by collecting and analyzing data from only a few people or items considered to be representative of the entire group. Thus, in this study, the researcher collected data from the personnel of First Bank of Nigeria Plc, Uyo.

CHAPTER FOUR

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

INTRODUCTION

This chapter entails the presentation of data analysis and interpretation of data collected. The data collected was through the use of questionnaire while the analysis was based on research questions and research hypotheses stated earlier in chapter one of this study. Simple percentages and tables were used to analyze the research questions and Chi-square statistical tools were used for testing of research hypotheses.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

INTRODUCTION

This chapter presents summary, conclusion and recommendations for further studies

SUMMARY

This study was carried out to examine whether the International Financial Reporting Standards (IFRS) in Nigeria has improved the quality of financial statement in First Bank of Nigeria Plc. To achieve this ultimate goal, the study revealed that:

In table 4.2.2 shows that 28 of the respondents representing 93% indicated “Yes” that IFRS aid quality of financial statement in First Bank of Nigeria Plc, Uyo while 2(7%) respondents pointed “Not Sure” on the question and it discovered that international financial reporting standards aid quality financial statement in First Bank of Nigeria Plc.

In table 4.2.3 shows that 25(83%) of the total respondents pointed “Yes” while 2 of the respondents representing 7% opted “No”. Also 3(10%) respondents asserted “Not Sure”. From the analysis, it was concluded that international financial reporting standards (IFRS) in Nigeria improve the quality of investment decision making in First Bank of Nigeria Plc, Uyo.

Also in table 4.2.4 shows that 23(77%) of the respondents indicated “Yes” that international financial reporting standards play a very significant role in banking institutions in Nigeria and also 4 respondents representing 13% pointed “No” while 3(10%) asserted Not Sure. It was discovered that international financial reporting standards has play a very significant role in banking institutions in Nigeria.

Table 4.2.5 shows that 25(83%) of the respondents indicated “Yes” that it has been effective implementation and adoption of IFRS in First Bank of Nigeria Plc, while 5(17%) opted on not sure on the question. From this analysis, it was concluded that there is effective implementation and adoption of IFRS in First Bank of Nigeria Plc

Table 4.2.6 shows that 16 (53%) of the respondents that indicated “Yes” there are problems confronting the staff of First Bank of Nigeria Plc, Uyo in enhancing quality financial statement. Also, 8 (27%) respondents pointed “No” while 6 respondents representing 20% asserted “Not Sure on the question. Therefore, it was noted that there are problems confronting the staff of First Bank of Nigeria Plc, Uyo.

CONCLUSION

Based on the findings and subsequent recommendation of this study, it was concluded that the adoption of IFRS is a right step in the right direction. Although there are many issues and challenges facing the implementation, the benefits outweigh the challenge. With adoption, Nigeria companies will produce a more credible financial statements that will not only be uniformed but also provide a basis for better interpretation. The invariably will boost investment confidence and attract cross border financial transactions which is the basis for economic growth.

Accordingly, these findings are not different from the results from other studies, in other parts of the world, such as Germany by Paananen and Lin (2008:26), Clarkson et al. (2009:26), Houque et al. (2010:22) and many others where they all reported that IFRS adoption does not necessarily lead to improved quality in financial reporting. Paananen. (2008:17) in a similar study in Sweden stated that IFRS adoption did not improve the quality of accounting in Sweden and went on to advise that it is dangerous to draw conclusions on using this kind of measures. These results should therefore be seen as part of the evidence vetting IFRS. Notwithstanding the mixed outcome, these results can also be used to explain that accounting quality can improve from IFRS adoption rather than changes in managerial incentives.

RECOMMENDATIONS

From the findings of this study, the researcher hereby recommends the following:

Steps to ensure a successful adoption and implementation of IFRS in Nigeria.
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 and conversion.
Compliance with IFRS timetable should be mandatory and failure should be marched with appropriate sanctions.
Government should Release more fund to FRC to educate all stakeholders with special reference to the academic to staff and accounting students who will uphold the future IFRS in the country and developing a plan to help properly equip the company for upcoming changes (Lewis and Pendril (1996).
Professional accounting bodies in Nigeria should make IFRS training a part of MCPE at a reduce cost.
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.
It is recommended that top management, external auditors and regulators being the key players in standards, need to work together and tighten compliance so that impact of IFRS could be felt more.

REFERENCES

ACCA (2008). Corporate Reporting P2 International; Berkshire, Kaplan Publishing.
Adams, P. (2004). Resolving Conflicts in Accounting System – Issues and Arguments; Lecture series; London; August 12 – 13.
Armstrong, C., M. Barth, A. Jagolinzer, & E. Riedl. (2007). Market reaction to the adoption of IFRS in Europe. Working paper, Stanford University.
Ashbaugh, H. and Pincus, M. (2001). Domestic Accounting Standards, International Accounting Standards and Predictability of Earnings‟, Journal of Accounting Research 39 (3) pp.417-434
Ball, R. (2006). International Financial Reporting Standards (IFRS): pros and cons for investment. Accounting and Business Research. 36, 5-27.
Ball, R., Robin, A. and Wu, J. (2003). Incentives versus Standards: Properties of Accounting Income in four Asian Countries. Journal of Accounting and Economics 29:1-51.
Barth, M. (2008). Global Financial Reporting: Implications for US Academics. TheAccounting Review. 83(5): 1159-1179
Barth, M., Landsman, W. and Lang, M. (2007). International Accounting Standards and Accounting Quality. Research paper Series, Stanford Graduate School of Business.
Barth, M., Landsman, W. and Lang, M. (2007). International Accounting Standards and Accounting Quality. Journal of Accounting Research 46:467-728
Bartov, E.Goldberg, S. and Kim M. (2005) Comparative Value Relevance among German, US and International Accounting Standards: A German stock Market perspective. Journal of Accounting, Auditing and Finance 20: 95-119
Chen H.,Tang Q., Jiang Y. and Lin Z.(2010). The Role of International Financial Reporting Standards in Accounting Quality: Evidence from the European Union. Journal of International Financial Management and Accounting 21:3 2010. 220-278
Das, B., Shil, N. C., & Pramanik, A. K. (2009). Convergence of Accounting Standards: Internationalization of Accounting. International Journal of Business and Management, 4(1), 78 – 90.

Related Topics:

Other Topics