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- AUDIT COMMITTEE AND FINANCIAL REPORTING QUALITY: EVIDENCE FROM NIGERIA
- AUDIT TENURE AND QUALITY OF FINANCIAL REPORTING (A CASE STUDY OF NIGERIA)
- CORPORATE FINANCIAL REPORTING AND AUDIT CHALLENGES IN NIGERIA
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THE APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) IN AN ORGANIZATION
This study deals with the application of International Financial Reporting Standard in an organization. Its main objective is to identify its prospectus and to analyze how the Nigerian standards conform to the accounting body. The theoretical method of data was used to gather the data and chi-square method was used to analyze the data collected. It found that the International Financial Reporting Standards has a great effect on the changing economic trend in the country. Due to the above finding, it was concluded that the financial results of different companies or business organizations cannot be compared and evaluate unless full information is available about the IFRS methods, which have been used. Finally, it was recommended that the prospectus of the application of International Financial Reporting Standards in business organizations should be identified, which would enhance the growth of the organizations’ financial status and that business organizations should try to analyze how the Nigerian standard conform to the accounting body in country.
TABLE OF CONTENTS
Title Page i
Table of Contents vi
Chapter One: Introduction 1
1.1 Background to the Study 1
1.2 Statement of Problem 3
1.3 Research Questions 4
1.4 Objectives of the Study 4
1.5 Statement of Hypotheses 5
1.6 Significance of the Study 6
1.7 Scope of the Study 6
1.8 Limitations of the Study 7
1.9 Definition of Terms 8
Chapter Two: Review of Related Literature 10
2.1 Introduction 10
2.2 Statement of Financial Position 16
2.3 Statement of Comprehensive Income 17
2.4 Generally Accepted Accounting Practices
2.5 Objectives of Financial Statements 24
2.6 Elements of Financial Statements 28
2.7 Adoption of International Financial Reporting
Standards (IFRS) 37
2.8 How to apply IFRS in Business Organization 39
Chapter Three: Research Method and Design 43
3.1 Introduction 43
3.2 Research Design 43
3.3 Description of Population of the Study 44
3.4 Sample Size 44
3.5 Sampling Technique 44
3.6 Sources of Data Collection 45
3.7 Method of Data Presentation 45
3.8 Method of Data Analysis 46
Chapter Four: Data Presentation, Analysis
and Hypothesis Testing 48
4.1 Introduction 48
4.2 Presentation of Data 48
4.3 Data Analysis 48
4.4 Hypothesis Testing 65
Chapter Five: Summary of Findings, Conclusion and Recommendations 71
5.1 Introduction 71
5.2 Summary of Findings 71
5.3 Conclusion 72
5.4 Recommendations 74
1.1 Background to the Study
The International Accounting Standards Board (IASB) being the global regulator of accounting standards has issued a set of standards which were known as International Financial Reporting Standards (IFRS). These standards had elicited reactions not only from the profession but the academia and the business world had made meaningful contributions to the debate. The business world had never had anything as commonly discussed in recent times as this IFRS save the millennium bug in the twilight of the 20th century. Primarily, the objective of financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. These users are multifarious: managers, shareholders, prospective investors, financial institutions, suppliers, customers, employees, competitors, governments and even the general public have one or two things that generate their interest in the financial reports of organizations.
In preparing financial reports, different procedures had hitherto been observed which are collectively known as Generally Accepted Accounting Practice (GAAP). GAAP are localized to suit local circumstances and this resulted in not having harmonized financial information of the parent companies in many countries including Nigeria.
In Nigeria, just of recent, the appealed Nigerian Accounting Standard Board (NASB) had as one of its primary duties to issue local accounting standards which are obligatory to be followed by accountants while preparing financial statements. Financial Reporting Council of Nigeria Act was enacted in 2011 to assume the responsibilities of the hitherto repealed Nigeria Accounting Standard Board.
With the emergence of multinationals, the economy has become global. In assessing the operations of subsidiaries operating in another country, similar accounting principles and conventions are to be used to make meaningful financial reports.
New names that actually reflect the meanings of some financial statements were given in the IFRS. Balance sheet metamorphosed to Statement of Financial Position while Profit and Loss became Statement of Comprehensive Income.
1.2 Statement of Problem
The implementation of the application of International Financial Reporting Standards in an organization in Nigeria today faces a lot of problems in terms of its application.
Prominent among these, is the problem of ineffective utilization of these standards in our Nigeria organizations.
Another problem that rocked the corporate financial circles in Nigeria in the late 1990s that seriously cast doubt on financial statements being prepared by some entities and stocks manipulation was one of these problems.
1.3 Research Questions
The following questions are asked for more understanding of the research work.
i. Is the prospectus of the application of International Financial Reporting Standards identified by the organization?
ii. What is the function of the International Financial Reporting Standards in conformity to the accounting body?
iii. How does the body meet with the changing economic trends in the Nigerian organizations?
1.4 Objective of the Study
The main objectives of this research are as follows:
1. To identify prospectus of the application of International Financial Reporting Standards in a business organization.
2. To analyze how this Nigerian standard conform to those of the accounting body.
3. The study also bothers on the review of this standard to meet the changing economic trends in the country.
1.5 Statement of Hypotheses
Ho: There is no significant relationship between International Financial Reporting Standards and the Nigerian business organization.
HI: There is a significant relationship between International Financial Reporting Standards and the Nigerian business organization.
HO: There is no significant relationship between Nigerian standard and the accounting body.
HI: There is a significant relationship between Nigerian standard and the accounting body.
HO: International Financial Reporting Standards have no effect on the changing economic trend in the country.
HI: International Financial Reporting Standards has an effect on the changing economic trend in the country.
1.6 Significance of the Study
This study is significant to the users of financial statements, the investors, creditors, government agencies, employees, management and other accounting bodies.
The above named users through the findings of this study will be aware of the assumptions on which accounts are based and the principles applied in producing them. This in turn will quicken their understanding and aid their interpretation of accounts.
The study is tailored towards revealing the problems of application of standards so as to aid the Nigeria Accounting Standard Board (NASB) with information on how to issue subsequent statement, which will not be problematic in future.
1.7 Scope of the Study
The study is aimed at analyzing the application of IFRS in an organization. Using a timeframe of 5 years (2011 – 2015), the study used a sample size of 80 for effective correlation.
1.8 Limitations of the Study
This study was carried out while the researcher was also engaged in attending lectures, writing seminar papers, tests and other assignment all within four (4) months period and as such only a limited time as available for the study.
Financial constraints were glossily inadequate as a result, my movement and study was limited.
In the course of personal interview conducted by me, it was difficult to obtain some information, as they were deemed confidential by the companies and persons visited.
In the face of the above limitation, it was virtually impossible to carry out an in-depth study. Every attempt possible has been made, however to capture the main purpose and objective of the study.
1.9 Definition of Terms
For easy and comprehensive understanding of this work, the researcher has given definitions to the under listed terms.
i. Accounting Method: An accounting method is the medium through which the fundamental accounting concepts are applied to financial transactions and to the preparation of financial statements. It is also the method adopted in recognizing, measuring and valuing an item of revenue, expense, gain, loss of any assets or liability.
ii. Accounting Bases: These are method that is adopted by an enterprise in applying the fundamental accounting concept to its financial transaction. They include for example, the determination of the accounting period for the purpose of revenue and cost recognition and the method used for the measurement of the value to place on items, appearing in the statement of financial position as at the end of each accounting period.
iii. Accounting Policies: They are those bases that rules, principle conventions and procedures are adopted in preparing and presenting financial statements.
iv. Accounting Information: This consists of the statement of financial position, statement of comprehensive income notes to the accounts, sources and application of fund value added statement and financial summary.
v. Stock: Stock otherwise referred to as inventories items of values held for used or sale by an enterprise and usually composed of raw materials supplied used in production, work in progress and finished goods.
vi. Exceptional Items: These are items through normal to the activities of an enterprise, but are abnormal as a result of their infrequent of occurrence and size, e.g. abnormal high bad debt.
vii. Extra Ordinary Items: These are items that occur outside the ordinary activities of an enterprise and are not expected to re-occur frequent.