1.1 BACKGROUND OF THE STUDY Internationalization of economic trade and globalization of business is on the ascendency. Consequently, financial statements prepared according to a nation’s local accounting system may hardly meet the needs of investors, business partners, financiers and decisions – makers who are conversant with international standards. A financial reporting system supported by governance, high quality standards, and sound regulatory frameworks is the key to economic development. Indeed, high quality standards of financial reporting, auditing, and ethnics underpins the trust that investors place in financial and non-financial information. This, thus play an integral role in contributing to a country’s economic growth and financial stability. According to financial system experts, the major strength of the IFRS is that it offers a lot of benefits to corporate and public enterprises in terms of costs; easy consolidation of financial statements; better management control of internal consistencies of reporting; and improved access to global financial capital markets and investment havens. The IFRS helps to facilitate the elevation of potential cross-border acquisitions, ventures and spin-offs for companies with focus on global operations or markets, amongst other financial reporting opportunities. One of the professional bodies with enormous roles in the IFRS project in 2011 implementation, the Institute of Chartered Accountants of Nigeria (ICAN) announced its plan to train its members on the standard with a view to exposing them to all the operational issues and the skills needed to handle them. According to Onwuama (2010), it is imperative for accountants to have the required skills that would make them be at the vanguard of the country’s efforts aimed at adopting the globally accepted standards for financial reporting for corporate entities. Appreciating the challenges of implementation of the novel standards in Nigeria is enormous. He observed that adequate time and resources need to be committed by corporate entities, including practicing firms, to revisit their operational and internal control systems with a view to changing them, where necessary, in order to meet the requirements of the IFRS in reporting the research for performance locally and internationally. The implication for this decision is that they are profoundly needed to build capacity to drive the process. Organizations need to revisit their operational and internal control systems. The laws need to be amended. The transition processes need to be handled efficiently, effectively and professionally in order to sustain the confidence of users of accounting services on the skills of chartered accountants. In view of this, there is need to build member’s capacity particularly in IFRS such that financial reports need to meet global practices in terms of quality, technical content, transparency of rules and stakeholders’ friendliness (Onwuama 2010). There are indications that most entities are still groping with sundry challenges that might scuttle the adoption of the nationwide agenda to which so much efforts had been committed and other stakeholders in the past one and – a-half years. According to Sule (2011), subsidiaries of multinational companies in Nigeria as well as local companies like Guaranty Trust Bank, Access Bank and Oando Nigeria PLC had started reporting on the basis of IFRS. There are still some issues that must be tackled by the SPIEs in order to achieve broad policy objectives of the IFRS in Nigeria economy. Many companies in Nigeria have began to nurse fear over the consequences of adopting this international standards from countries that are highly advanced. There are much financial risks companies are bound to face if this standards are adopted. However, the adoption of international accounting standard and international financial reporting standard does reveal high volatility and risk that will be inherent in companies if the latter are applied in producing quality financial reporting in Nigeria. (Tyrral, Wood ward and Rakhunbekova, 2010) It is against these back drops that this research is under taken by the student researcher to critically assess the influence of the adoption of IFRS on corporate performance in Nigeria
1.2 STATEMENT OF RESEARCH PROBLEM Will the adoption of IFRS by entities help to produce uniform financial reporting and corporate performance Nigeria? Is IFRS adoption in financial reporting more complex to investors and corporate organization? Will IFRS reduce frauds and financial risks and enhance the performance of Business enterprises in Nigeria than the SAS? Are there more cost implications of IFRS adoption in the quality of financial reporting and firm performance in Nigeria? Does the adoption and application of IFRS affect debt covenant and legal contracts of Nigerian firms in quality financial reporting and performance? Does variances in local regulations pose a major challenge to the adoption and compliance of IFRS in financial reporting corporate performance in Nigeria?
1.3 OBJECTIVES OF THE STUDY The objectives of this study are as follows: To establish if the adoption of IFRS by entities will help to produce uniform financial reporting and performance by corporate organizations in Nigeria. To find out if IFRS in financial reporting adoption are more complex to investors and corporate organizations in Nigeria. To ascertain if IFRS adoption will reduce frauds and financial risks and enhance performance of business enterprise in Nigeria. To ascertain the cost implications of IFRS on corporate performance in Nigeria. To find out how the adoption and application of IFRS affect debt covenants, financial instruments and legal contracts of Nigerian firms’ performance To establish if the variances in local regulations pose a major challenges and threat to the compliances of IFRS on corporate performance in Nigeria.
1.4 SCOPE OF THE STUDY This study is aimed at carrying out a critical analysis and evaluation of the influence of the adoption of impact IFRS in quality of financial reporting in Nigeria. Geographically, it focuses on professional accountants that have adequate knowledge of IFRS. It also maintain a focal point on some selected companies which are already warring up for the conversion and adoption of IFRS in January 1, 2012 in financial reporting in Benin City, Edo state, Nigeria.
1.5 SIGNIFICANCE OF THE STUDY This study will assist preparers of financial statement in Nigeria to see the reason to adopt fully IFRS in financial reporting in Nigeria. The government, especially the law making body will find it a veritable tool in policy formulation especially in this period of globalization to assist the accounting professional bodies to draft out new local standards that can compliment the IFRS adoption locally. The Nigerian Accounting Standard Board (NASB) will find it a useful material or compendium. Future researchers in this subject matter will no doubt find it extremely educating and a future research material. Stakeholders and shareholders will largely appreciate it as investment guide and learning purpose.
1.6 STATEMENT OF RESEARCH HYPOTHESES For the purpose of this study, the null hypothesis (Ho) and alternative hypothesis (Ho) are used. Ho: The adoption of IFRS by entities will not produce uniform financial Reporting and enhances corporate performance in Nigeria. Attentive hypothesis Ha: The adoption of IFRS by entities will help to produce uniform financial reporting and enhance corporate performance in Nigeria. 2. Ho: The adoption of IFRS will not reduce frauds and financial risk and enhance the performance of Business enterprise in Nigeria. Ha: The adoption of IFRS will reduce frauds and financial risks and enhance the performance of business enterprise in Nigeria. 3. Ho: There are no cost implications of IFRS adoption in the quality of financial reporting and corporate performance in Nigeria. Ha: There are cost implications of IFRS adoption in the quality of financial reporting and corporate performance in Nigeria.
1.7 RESEARCH METHODOLOGY A research Methodology according to Agbonifoh and Yomere (1999) refers to the methods, procedures or modalities by which the research intends to accomplish the objective of his or her research project. According to Izedonmi (2008), it encompasses the population of the study, the sample size, research instrument, source of data as well as analysis plans. The population of the study comprise of all quoted companies in Nigeria, the sample size is limited to five companies. The source of data is the primary and secondary data. The instrument for the study is the Likert type questionnaire which shall be used to elicit information from respondents. However, the data generated where analysed using Anova, a parametric test statistics, which measure the relationship between two or more associated variables.
1.8 LIMITATION OF THE STUDY There is no study undertaken by any research that is entirely perfect. As such this study may not be perfect. This is due to some constraints that may affect this research in the causes of the study. These constraints are informed of finance cost, inadequate research material in Nigeria and respondents response rate.
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