CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

As the business world becomes closer in its financial and trade ties, many countries are moving towards International Financial Reporting Standards (IFRS), common accounting rules that define how transactions should be reported and what information should be disclosed in financial statements (IASB, 2007). This unitary set of standards has solved many problems while creating others. However, this study is examining the impact of IFRS disclosures on the Bank performance.

It is important to look at the big picture and the overarching aim of IFRS. In an increasingly global market place, international comparability is critical to enable the effective allocation of scarce resources. To achieve international comparability the key nations around the world need to commit to one global set of accounting standards.  While over 100 countries have already adopted IFRS, key countries like the United States, Japan and India are yet to require IFRS for listed companies (Bradshaw et al, 2012).

It is important to note that companies that use the same standards to prepare their financial statements can be compared to each other more accurately. This is especially important when comparing companies located in different countries, as they might otherwise be using different rules and methodologies to prepare their statements. This increase in comparability has helped investors better determine where their investment dollars should go thereby enhancing Bank performance as there will be more investors to invest in the company. Though, the United States has not yet adopted International Financial Reporting Standards and other countries continue to hold out as well (Bradshaw et al, 2012). This makes accounting by foreign-based companies that do business in America difficult as they often have to prepare financial statements using IFRS and another set using American Generally Accepted Accounting Principles (Bradshaw et al, 2012).

IFRS disclosures use a principles-based, rather than rules-based, philosophy. A principles-based philosophy means that the goal of each standard is to arrive at a reasonable valuation and that there are many ways to get there. This gives companies the freedom to adapt IFRS disclosures to their particular situation, which leads to more easily read and useful statements. There is a downside to the flexibility that IFRS disclosure allowsorganizationsto utilize only the methods they wish to, allowing the financial statements to show only desired results. This can lead to revenue or profit manipulation, can be used to hide financial problems in the company and can even encourage fraud. For example, changing the method of inventory valuation can bring more income into the current year's profit and loss statement, making the company appear more profitable than it really is. While IFRS requires that changes to the application of the rules must be justifiable, it is often possible for companies to "invent" reasons for making the changes. Stricter rules would ensure that all companies are valuing their statements the same way.

1.2   STATEMENT OF PROBLEM

Masud, (2013) disclosed that in the accounting and finance sector, companies cook figure and manipulate financial statement, tax avoidance is the norm of the day while persistent earning management is left unchecked by the authorities because of weak and ineffective regulation. Most of Nigeria statement of accounting standard (SASS) or NG-GAAP issued by the NASB are out data and considered insufficient to provide the necessary guidance in the preparation of qualitative financial statement. The following challenges exist premeditated this research;

Apparent lack of global unifying reporting standard stock valuation assessment of companies in and outside the country. Thus giving rise to disparity in accounting reportage.

Presence of fraudulent preaches by corporate entities as regards under valuation of profit for tax purpose with particular emphasis on the use of LIFO method.

Increases investment protectial of corporate entity in the country and this heavely tied to adoption of local accounting standard (GAAP) generally investor are often time regarded financial statement prepared with local GAAP as inferior and lacking integrities.

The researcher noted that adoption of IFRS particular for stock valuation help to address the above challenge. To help confirm these assession, this research is carry out to determined if the adoption IFRS will approve valuation of public companies in Nigeria.

1.3   OBJECTIVE OF THE STUDY

The purpose of carrying out the research work is to investigate the impact of international financial reporting standard on stock valuation in public company in Nigeria. The following strategies objective come to play.

To investigate the level of difference in stock valuation during the pre-IFRS and post IFRS period.

To measure the extent to which valuation of asset differs in the pre-IFRS and post IFRS.

To ascertain the different in capital valuation in pre-IFRS and post – IFRS.

To establish weather measurement of profitability differ in pre-IFRS and post IFRS.

1.4   RESEARCH QUESTION

i.      Is there significant difference in stock valuation in pre-IFRS and post – IFRS.

ii.     To what extent does valuation of asset differ in pre IFRS and post IFRS. iii.    Would capital valuation difference in pre-IFRS and posts IFRS. iv.    Does measurement of profitability differ in pre-IFRS and post IFRS. 1.5   STATEMENT OF HYPOTHESES

Ho:   There is no significant difference in stock valuation in pre-IFRS and post IFRS. Hi:    There is significant different in stock valuation in pre-IFRS and post IFR. Ho:   There is no significant difference in asset valuation in pre-IFRS and post IFRS. Hi:    There is significant difference in asset valuation in pre-IFRS and post – IFRS. Ho:   There is no significant difference in asset valuation in pre-IFRS and post – IFRS. Hi:    There is significant difference in capital valuation in pre-IFRS and post IFRS. Ho:   There is no significant difference in measurement of profitability in pre-IFRS and post IFRS. Ho:   There is significant difference in measurement of profitability in pre-IFRS and post IFRS. 1.6   SCOPE OF THE STUDY The thrust of the research work is on the impact of international financial reporting standard on stock valuation in public company in Nigeria. The need to carryout the study is motivated by difference in stock valuation method, lack of global reporting standard on valuation of corporate performance as well as under valuation of profit. In view of this, the main objective of the research is to investigate the need of difference in stock valuation during the pre-IFRS and post IFRS period. Export factor research design was adopted for use, involving the connecting of secondary data especially annual report and account of A.B.C transport company Plc, OandoPlc, Julius Berger, Nestle Nigeria Plc and Dangote Cement Plc. The time courage from the research is year 2007-2014, while the research in Asaba metropolis. Frequency distributed table and descriptive statistic are used for data presentation and analysis, while E-view and sample t-test are used to test research hypothesis. Finding obtain with a large extend disclose variation in stock valuation in pre IFRS and post IFRS.