CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

Anthony (2011) inserted that before the financial crisis, there was a desire to create high quality, transparent and comparable information in general purpose of financial statement around the world, the idea has gained even more momentum after the financial crisis. As part of this effort, there is a push for the development of a single set of high quality, globally accepted accounting standards. This started in 1973 when the International Accounting Standard Committee (IASC) was formed by 16 professional accounting bodies from Canada, United State of America, United Kingdom, Germany, France, Netherlands, Australia, Mexico and Japan. The IASC was reorganized into the International Accounting Standard Board in 2001. To date, the IASB has developed accounting standards and related interpretations that are known as the International Financial Reporting Standard (IFRS) and IFRIC respectively.

Anthony (2011), International Financial Reporting Standard (IFRS) is a global agenda to foster common benchmark in financial information across international borders with the aim of generating momentum for economic development. The first IFRS was issued in 2003 by which time at least 19 countries required compliance with the international standard. Since then nearly 70 countries (including EU countries) have mandated IFRS for all listed companies. Further about 23 countries have either mandated IFRS for some listed companies or allow listed companies to voluntary adopt IFRS. However, as at 2011, more than 120 countries continue domestically to develop accounting standard based on IFRS, and this list include some large economies like Brazil, Canada, China, Japan, Indian and the US. Other countries like Argentina, Indonesia, Japan Mexico, Russia, adopted the IFRS.

This study seeks to emphasize on the importance of IFRS to the unification of accounting standards all over the world and the need for all stakeholders, practicing accountants, accounting students and investors in Nigeria to be fully acquainted with relevant international accounting standards.

1.2       Statement of Problem

Statement of the problems of this research is as follows;

1.       Poor knowledge of IFRS procedures and implementation of the standards in Nigeria.

2.       Low level of awareness for preparers and users of financial statements, regulators, educators, auditors and other stakeholders.

3.       Accounting education and training among regulatory authorities and stakeholders on the practical implementation of IFRS constitutes a set back to the process.

4.       Effect of existing laws on the smooth transition process to IFRS.

5.       Difficulty in understanding the impact of IFRS on various sectors of the economy and their economic operations respectively.

1.3       Research Questions

The following are the research questions:

·                     Why using the application of accounting standard with IFRS?

·                       Why using the financial statements based on IFRS?

·                     What is the relevance of IFRS to the development of Nigeria economy?

1.4       Objectives of the Study

Having discovered the aforementioned problems which are caused by lack of and/or poor application and variation of accounting standards and policies especially with group companies, the researcher decided to carryout an empirical study to test the appropriateness and validity of the observations.

To this end, the purpose of this study has been geared towards accomplishing some major objectives.

1.           To determine the number of listed companies in Nigeria that complies with IFRS.

2.           To determine if IFRS improve the quality of financial reports.

3.           To evaluate the relevance of IFRS to the development of Nigeria economy.

1.5       Statement of Hypotheses

Hypothesis One

Ho:    The listed companies in Nigeria do not comply with IFRS.

Hi:     The listed companies in Nigeria comply with IFRS.

Hypothesis Two

Ho:    Listed companies in Nigeria do not base their financial statements on IFRS.

Hi:     Listed companies in Nigeria base their financial statements on IFRS.

Hypothesis Three

Ho:    IFRS is not relevant to the development of Nigerian economy.

Hi:     IFRS is relevant to the development of Nigerian economy.

1.6       Significance of the Study

The importance of this study cannot be over-emphasized. This study will contribute to the development of the Nigerian economy through accelerating the development of the Nigerian Stock Exchange. It will also help to increase the awareness of the adoption of IFRS in Nigeria among accounting students in higher institutions of learning in Nigeria, who may come across it in one way or the other.

Finally, this study will in clear terms present the relevance of adopting IFRS to listed companies investors and stakeholders.

1.7       Scope of the Study

This research work will cover across section of individual investors, listed companies and students in Auchi Polytechnic,

1.8       Limitations of the Study

Many factors worked against having a perfect result or an exhaustive study of this topic as regards efficient collection of information for the research work. The major limitation of this study lies in its scope. It would have been desirous for the research to cut across the country but due to time and financial constraints, it has been restricted to selected investors, listed companies and students.

Another outstanding constraint is the unwillingness on the part of the respondents to give correct and convincing information due to fear of information being disclosed by competitors and time taken to supply needed information.

1.9       Definition of Terms

1.           Financial Statement/Report: It is the annual statement, summarizing company activities over the last year. They consist of the comprehensive income statement, which refers to profit or loss together with the certain other gain or losses such as revelation if required the cashflow statement together with supported notes (Jubril, 2010).

2.           Standards: It is a set out rules and procedures relating to the measurement, valuation and disclosure of accounting transactions.

3.           Accounting Standards: A definitive standard for financial accounting and reporting establish in the form of a International Accounting Standard Board (IASB) issued by the International Accounting Standards committee.

4.           International Financial Reporting Standard (IFRS): It is a set for standard developed and issued by the International Accounting Standard Board (IASB).

5.           Listed Company: A company that has a listing agreement with a major stock exchange and whose shears have a quotation on that exchange.

6.           Investors: A person or an organization that invest money into business or something that will yield more income.