International Financial Reporting and Standards on Earnings Management (A Case Study of United Bank for Africa, {UBA})
Chapter One
Objectives of the Study
The main objective of this study is to examine the impact of International Financial Reporting Standards (IFRS) on earnings management practices in United Bank for Africa (UBA).
The specific objectives are to:
- Evaluate the extent of earnings management practices in UBA before and after the adoption of IFRS.
- Assess whether the implementation of IFRS has improved the transparency and reliability of UBA’s financial statements.
- Determine the relationship between IFRS-compliant reporting and the level of discretionary accruals in UBA.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
International financial reporting and standards
The Conceptual Framework for Financial Reporting serves as the foundation for IFRS, outlining the objectives and underlying concepts for general-purpose financial reporting. It assists the IASB in developing standards that are based on consistent principles, guides preparers in developing accounting policies when no specific standard applies, and aids stakeholders in interpreting the standards. The framework emphasizes the provision of financial information that is useful for making decisions about providing resources to the entity, focusing on the qualitative characteristics of relevance and faithful representation
Empirical studies have examined the impact of IFRS adoption on financial reporting quality. For instance, Kabwe (2023) investigated the effect of IFRS compliance on financial reporting quality in a developing country context and found that adherence to IFRS enhances the quality of financial reports by improving their reliability and comparability . Similarly, Onah and Edeh (2024) conducted a study on the effect of IFRS adoption on financial reporting comparability among publicly listed companies across different countries. Their findings indicate that IFRS adoption significantly enhances the consistency and transparency of financial reporting practices globally
However, the implementation of IFRS is not without challenges. Chand et al. (2024) explored the ambiguity present in IFRS and its impact on auditors’ judgments. Their study revealed that higher levels of ambiguity in IFRS can lead to less aggressive reporting judgments by auditors, and that auditors with greater tolerance for ambiguity are more likely to choose accounting treatments that best reflect the economic substance of transactions.
In the African context, the adoption and compliance with IFRS have been subjects of extensive research. Effah (2024) conducted a bibliometric review of IFRS adoption and compliance research in Africa, highlighting the need for enhanced collaboration among corporations, experts, and regulatory agencies to improve understanding and implementation of IFRS in the region .
Furthermore, the IFRS Foundation has expanded its scope to include sustainability-related financial disclosures. The establishment of the International Sustainability Standards Board (ISSB) in 2021 marked a significant step towards integrating sustainability considerations into financial reporting. The ISSB’s inaugural standards, IFRS S1 and IFRS S2, issued in 2023, require companies to disclose information about sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance, or cost of capital
Toumeh and Yahya (2019) explain that IFRS are a fundamental set of principles that guide the entire accounting process, from the initial recording of financial transactions to the final preparation of financial statements.
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CHAPTER THREE
RESEARCH METHODOLOGY
Research Design
This study adopts a quantitative ex-post facto research design. This design is appropriate because the data to be used (financial statements of UBA before and after IFRS adoption) already exist and cannot be manipulated. It allows the researcher to examine and compare earnings management practices and the transparency of financial reporting over two distinct periods pre-IFRS and post-IFRS.
Population of the Study
The population of this study comprises all publicly listed financial institutions in Nigeria. However, the study focuses solely on United Bank for Africa (UBA) Plc, one of the largest banks in Nigeria, due to its consistent financial reporting practices and early adoption of IFRS in 2012.
CHAPTER FOUR
 DATA PRESENTATION, ANALYSIS, AND INTERPRETATION OF RESULTS
Introduction
This chapter presents the results of the data analysis carried out to evaluate the relationship between the adoption of International Financial Reporting Standards (IFRS) and earnings management in United Bank for Africa (UBA). The chapter also interprets the findings with respect to the stated hypotheses and research questions. The data analyzed cover the period from 2007 to 2016, with five years each representing the pre-IFRS and post-IFRS adoption periods.
CHAPTER FIVE
 SUMMARY, CONCLUSION, AND RECOMMENDATIONS
Summary of Findings
This study examined the impact of International Financial Reporting Standards (IFRS) adoption on earnings management and the transparency of financial reporting in United Bank for Africa (UBA). The research employed secondary data sourced from the bank’s published financial statements between 2007 and 2016, covering both pre- and post-IFRS periods. Using the Modified Jones Model and paired sample t-tests, the study tested two hypotheses:
Whether earnings management practices significantly differed before and after IFRS adoption.
Whether IFRS adoption improved the transparency and reliability of financial statements.
The findings revealed the following:
Earnings Management Practices: There was a statistically significant reduction in discretionary accruals after IFRS adoption, indicating that earnings management declined post-IFRS.
Financial Reporting Transparency and Reliability: Indicators such as return on assets (ROA), reduced earnings volatility, and consistent unqualified audit opinions post-IFRS suggest improved transparency and reliability in UBA’s financial reports.
Conclusion
The adoption of IFRS has had a positive and significant impact on financial reporting quality in UBA. Specifically, the study concludes that:
IFRS adoption has contributed to a reduction in earnings management, making the financial statements more reflective of the bank’s true financial position.
Financial statements became more transparent and reliable post-IFRS, improving stakeholders’ confidence in financial reporting. These conclusions reinforce global findings that IFRS adoption enhances comparability, accountability, and integrity in financial reporting, particularly in developing economies like Nigeria.
Recommendations
Based on the findings and conclusion of this study, the following recommendations are made:
Strengthen Monitoring Mechanisms: Regulatory authorities such as the Financial Reporting Council of Nigeria (FRCN) and the Central Bank of Nigeria (CBN) should intensify their oversight functions to ensure sustained compliance with IFRS provisions. Continuous IFRS Training: UBA and other financial institutions should invest in continuous professional training for accounting and finance staff to ensure up-to-date knowledge and correct application of IFRS.
Adoption by Non-listed Entities: The benefits of IFRS observed in listed companies like UBA suggest that its adoption should be encouraged among non-listed firms to improve overall corporate transparency in Nigeria.
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