THE EFFECT OF FINANCIAL REPORTING STANDARDS ON THE QUALITY OF FINANCIAL REORTING IN NIGERIA


Content

Abstract

This research examines the effect of financial reporting standards on the quality of financial reporting in Nigeria, aims to bring out all the various guidelines postulates, assumption, principles and methods adopted by a reporting entity in the preparation of its account so as to avoid further conflict between the prepares and users of financial statement. It also aims at bringing to the awareness of the users of financial statement the benefits of financial reporting standard towards improving business performance. The researcher adopted the primary source of data collection. it was found that the various conventions generalization, method were postulate practices, procedures, principle and standards are not synonymous and as such should not be treated interchangeably or taken to mean the same thing by users of financial statements. Finally, it was recommended that the standards setting body maintain cooperation with government regulatory bodies and financial institution so as to ensure compliance and disclosure in all material respect with financial reporting standard requirement. The financial reporting standard (FRS) should ensure full compliance.

 


TABLE OF CONTENTS

Title Page                                                                                 i

Certification                                                                     ii

Dedication                                                                       iii

Acknowledgements                                                          iv

Abstract                                                                           v

Table of Contents                                                             vi

 

Chapter One: Introduction                                            1

1.1      Background to the Study                                                 1

1.2      Statement of Problems                                             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                                                   7

1.8      Limitation of the Study                                            7

1.9      Definition of Terms                                                  8

 

Chapter Two: Review of Related Literature                  11

2.1      Introduction                                                             11

2.2      Historical Development of Financial Statement               12

2.3      International Financial Reporting Standards (IFRS) 17

2.4      Objectives of Financial Statement and Reporting    26

2.5      Disclosure in Corporate Financial Reporting           28

2.6      Nigeria and IFRS Adoption                                       30

2.7      IFRS and the First Time Adopters                            33

2.8      Financial Reporting Quality                                     41

2.9      Managing the Transition Process                             47

 

Chapter Three: Research Method and Design               51

3.1      Introduction                                                             51

3.2      Research Design                                                      51

3.3      Description of Population of the Study                    52

3.4      Sample Size                                                             52

3.5      Sampling Techniques                                              52

3.6      Sources of Data Collection                                       52

3.7      Method of Data Presentation                                   53

3.8      Method of Data Analysis                                          53

 

Chapter Four: Data Presentation, Analysis and

Hypothesis Testing                                                                55

4.1   Introduction                                                             55

4.2   Data Presentation                                                    55

4.3   Data Analysis                                                           55

4.3   Hypothesis Testing                                                  61

 

Chapter Five: Summary of Findings, Conclusion

and Recommendations                                                  67

5.1   Introduction                                                             67

5.2   Summary of Findings                                              67

5.3   Conclusion                                                              69

5.4   Recommendations                                                   70

        References                                                               74

        Appendices                                                              77

 


CHAPTER ONE

INTRODUCTION

1.1      Background to the Study

The end product of financial reporting is the preparation and publication of financial statement. A substantial number of alternative postulate, principle assumption and method adopted by a reporting entity in the preparation of financial statement can significantly affect its result of operation and understanding the interpretation of financial reporting in financial statement.

The financial statement prepared by the accountants is based on convention that is derived from printable reports and there conventions originate from such concepts as: entity, going concern, periodicity, realization consistency, matching concept, historical cost. These concepts are fundamental to financial reporting standards and presentation of financial statement, disclosure of fundamental financial concept and acts followed.

This is because financial statement are for interest to a variety of users, especially shareholders, the use of financial statement clearly valuable evaluation of a reporting enterprise unless if financial statement clearly disclose the significant financial accounting policies that have been adopted in their preparation.

Its is also adopted in recognizing measures and values on item of revenue, expense, gain, loss or any asst or liability. Financial reporting practice have evolved in response to the verity and complexity of types of enterprise and business transaction, there exist more than one recognized calculating profit, measuring depreciation, valuing inventory.

The financial reporting standards are developed to ensure a high degree of standardization in the published financial statement. They provide the necessary information about how financial reporting information should be gathered, prepared and presented in order to improve the value of its contents and facilitate through understanding.

1.2      Statement of Problem

Financial reporting standards as an aspect of the accounting profession is concerned primarily with the Tran writing of financial information to the user who would use it to improve the outcome of their decision process.

The financial information are embodied in the financial statement which serves as a means of communicating information to interested parties the obligation and performance of the reporting entity or enterprise in Nigeria system.

In preparing and presenting financial statements, the accountants must be guided in such preparation by the standard of the profession to ensure that such financial statement prepared and presented will facilitate a thorough understanding to its user.

So, in view of the above, the purpose of this research is to evaluate the effects of financial reporting standards ob the quality of financial reporting in Nigeria. However, there are number of problems associated with the application of financial reporting standard along side with the benefits.

1.3      Research Questions

The following research questions are used in the research work.

1.          What is the effect of financial reporting standard on the quality of financial reporting in Nigeria?

2.          What are the problems encountered in the application of financial reporting standard?

3.          Are financial reporting standard appropriate in some circumstances in preparing financial statement?

4.          Are financial reporting standard to defaulted and too many?

5.          Is financial reporting disclosing required information reporting in excess?

1.4      Objectives of the Study

1.     To bring out all the various guidelines postulates, assumption, principles and methods adopted by a reporting entity in the preparation of its account so as to avoid further conflict between the prepares and users of financial statement.

1.          To review the various financial reporting standards and their disclosure requirement, so as to aid their upstanding and interpretation thereof.

2.          To identify the objective of financial reporting standard to business enterprise and to users.

3.          To identify the problem posed by the application standard as well as identify their solution.

4.          To bring to the awareness of the users of financial statement the benefits of financial reporting standard towards improving business performance.

1.5      Statement of Hypotheses

Taking cognizance of the above in this research work, two (2) hypotheses statement were formulated viz:

Hypothesis I

Ho:  Financial reporting standard has no significant effect on the quality of financial reporting in Nigeria.

Hi:   Financial reporting standard has significant effect on the quality of financial reporting in Nigeria.

 

Hypothesis II

Ho:  There are no problems encountered in the application of financial reporting standard.

Hi:   There are problems encountered in the application of financial reporting standard.

1.6      Significance of the Study

At the end of this research work, one will be able to know the procedures adopted in the preparation of financial statement reporting and the information contained therein.

Consequently, the relevance of the various concepts and convention in the preparation of financial will be classified. This is based on the fact that an attempt will be made to discover the importance of disclosure of the various concept and convention used in the preparation of financial statement, the understanding and interpretation of which it will greatly affect the decision of users.

Also, the study will broaden the knowledge of the academic community on the importance of financial reporting standard on the quality of financial statement and their subsequent disclosures.

1.7      Scope of the Study

The scope of this research work is limited to the effect of financial reporting standard on the quality reporting in Nigeria, a case study of Zenith Bank Plc.

In this study, the research covers in depth information gathered in such areas as, the historical development of financial statement, the objective of financial reporting, the various financial reporting standard, postulate the theoretical concept and principles. The nature of financial reporting standards and their overhead and effect, the entities that are concerned with financial reporting standard is presented as well as the users of financial statement.

1.8      Limitations of the Study

In carrying out this research work, a number of difficulties were encountered.

1.     The sourcing of data and information for the research study posed a lot of constraints on the research. For instance, officials of Zenith Bank Plc referred the researcher to the Bank’s website, which consulted contained information not detailed enough for the study. Their refusal to give out relevant information was based on reason of secrecy and lack of authority.

2.     The non-availability of existing research materials made the researcher to search deeply for relevant data information from the internet, library and book stories.

3.     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.

1.9      Operational Definition of Terms

For the purpose of clarity, some of the terms in the research work as derived by IAS are explained below.

Financial Statement: This is a formal record of the financial activities of a business, person or other entity.

 

 

Financial Policies: These are those bases or principles describing a corporation choices regarding its debt/equity mix, currencies of denomination, maturity structure and hedging of decision with a goal of maximizing the value of the firm to some set of stockholders.

Financial Information: These are data such as credit cards numbers, credit ratings, accounting balances and other monetary facts about a person or organization that are used in billing, credit assessment loan transactions and other financial activities.

Financial Reporting Standards: This is a set of accounting standards stating how particular types of transactions and other event should be reported in the financial statement.

Entity: This means an economic unit that is treated as separate from parties having proprietary or economic  interest.

 

Investment: These are asset acquired for the purpose of income generation without any activities in the form of production, trade or provision of services.

Asset: This is a research controlled by an entity as a result of past event from which future economic benefit are expected.

Liability: A present obligation to transfer economic benefit as a result of past transaction.

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