The demand for transparence and lucidity in the presentation of fiscal statements has been an endemic phenomenon which has contributed to the high degree of corruptness in Nigeria. This degree of insufficiency in proper revelation of relevant information is peculiar to most underdeveloped economic systems. Ali et al. , ( 2009 ) buttressed the point that the degree of revelation of adequate and dependable information by companies in emerging states lags behind developed western capital markets and regulative organic structures are less effectual in implementing the accounting ordinances. They added that abroad investors are frequently hesitating to put in companies runing in emerging economic systems due to the deficiency of transparence and deficiency of credence of internationally recognised criterions. Chamisa ( 2000 ) pointed out that the international accounting harmonisation aim is critical for developing states because of their important dependance on influxs of foreign capital to finance economic and industrial developments. This statement is clearly relevant to the Nigerian economic system, which is dependent on the international establishments like World Bank and International Monetary Fund for support.
In a developing economic system, such as Nigeria, fiscal sector development has been accompanied by structural and institutional alterations. Fiscal sectors by and large have long been recognised to play a important function in economic development of an economic system ( Ogujuiba and E.Obiechina, 2010 ) .This sector is frequently seen as the anchor of the state ‘s economic system due to its impact. The fiscal system in Nigeria became liberalized when structural accommodation programme was introduced in the 1980s. In recent old ages the system had undergone important alterations in footings of the policy environment, figure of the establishments, ownership construction, deepness and comprehensiveness of markets, every bit good as in the regulative model. However, in malice of the far making reforms of the past two decennaries, the Nigerian fiscal system is non yet in a place to carry through its possible as a propellor of economic growing and development ( Onoja et al.,2012 ) .
In Nigeria, most companies including fiscal establishments have been following with criterions issued by The Nigerian Accounting Standard Board ( NASB ) for a figure of old ages. These criterions represent Nigerian Generally Accepted Accounting Practice ( PWC, 2011 ) . The information disclosed in Audited Financial Statements ( AFS ) is guided chiefly by the Companies and Allied Matters Act ( CAMA ) 1990. Section 334 ( 2 ) of the Act provides inside informations of information to unwrap. In add-on to this proviso, Bankss and other fiscal establishments including Primary Mortgage Institutions ( PMI ) are expected to follow with Banks and Other Financial Acts ( BOFIA ) , and Nigeria Deposit Insurance Corporation ( NDIC ) Act 2006 ( Abiola and Ojo, 2012 ) .
However, in recent old ages it has been rather common for emerging economic systems to follow, either entirely or partially modified signifier, International Financial Reporting Standards ( IFRS ) as promulgated by the International Accounting Standards Board ( IASB ) , with a position to better corporate coverage criterions and promote international investings for the development of their economic systems otherwise fighting due to miss of resources ( Ali et al, 2009 ) . To this terminal, all fiscal establishments in Nigeria have been mandated by the regulative organic structures from January 1, 2012 to follow IFRS as a agency of bettering fiscal coverage criterions and promote international investors to put in the state.
1.2 Research Aim
The overall purpose of this research is to measure the chances and the challenges of acceptance of IFRS by fiscal establishments in Nigeria. It considers what impacts the acceptance of IFRS could hold in controling the degree of corruptness and guaranting that high degree of transparence is maintained in the major sector of the economic system.
1.3 Research Aims
Specifically, within the context of this thesis, the aims of this research are to:
1 ) To analyze if deficiency of transparence, chiefly the unequal revelation of relevant information in the fiscal statements and incomparability with planetary accounting criterions were the factors that necessitated the acceptance of IFRS by Nigerian Financial establishments.
2 ) To measure if the costs of the acceptance of IFRS outweigh its benefits. Consequently to enable the research worker to measure the chances and challenges the acceptance of IFRS is holding on the fiscal sector.
3 ) To measure the impacts the acceptance of IFRS will hold on relevant countries of the fiscal studies runing from the readying and presentation of the fiscal statements, information engineering and audit study.
4 ) To research the possible benefits local and foreign investors will deduce from the IFRS acceptance.
The reappraisal of the current Hagiographas on IFRS acceptance has focused chiefly on the development economic systems, sing the impacts its acceptance will hold on those emerging markets. For case, Bremer and Elias ( 2007 ) highlighted that companies from developing economic systems with weak fiscal transparence and corporate administration will happen it hard to raise capital and pull foreign investors. Similarly, D.Singh and Newberry ( 2008 ) focal point on good corporate administration as one of the demands for following with International fiscal coverage criterions by developing economic systems.
The singularity of this thesis is that it is specifically concentrating on the fiscal establishments in a developing economic system, where the application of these international fiscal coverage criterions is overriding. The function of fiscal establishments in developing economic systems can non be overlooked, as stated by Bakker and Gross ( 2004, p.3 ) because they facilitate nest eggs mobilization by offering both persons and institutional rescuers and investors extra instruments and channel for arrangement of their financess. In add-on, they provide credibleness for developing economic systems in International market. Hence, the research worker would be diging into the chances and challenges the acceptance of international fiscal coverage criterions will hold on these fiscal establishments in the context of Nigerian economic system.
1.4 Statement of Research Problem and Questions
The purpose of this research is to derive an penetration on the principle behind the acceptance of IFRS by fiscal establishments in Nigeria, the chances and challenges of the passage from Nigerian GAAP to IFRS and the impacts of its acceptance.
In Nigeria ‘s economic history, the paces of the last few old ages, which have been internationally acclaimed, was exceeding. The many reforms that have engendered the current success have mostly included those in the fiscal sector, peculiarly, the positive policy displacements in the domestic money market as a first measure towards a more robust and digesting installations for the sector ( Iganiga, 2010 ) . President of Institute of Chartered Accountant of Nigeria ( ICAN ) , Mrs Elizabeth Adegite has stressed the demand for transparence in the state ‘s fiscal establishments, stating this would pay war against future failure in the sector ( Ekeleme, 2009 ) . The acceptance of IFRS by this sector should turn to the issue of this deficiency of transparence.
In order to accomplish the aims of this research, the inquiries that this determination seeks to reply are:
1 ) What are the impulsive factors and likely restraints the acceptance of IFRS will enforce on the fiscal Institutions in Nigeria?
2 ) What impacts would IFRS acceptance have on the fiscal statements and other indispensable countries of the fiscal system?
1.5 Value of this Research
This research adds value to current research specifically in the country of Impacts of IFRS acceptance, in the context of Nigerian fiscal establishments, where the execution of IFRS merely took off beginning of this twelvemonth 2012. This study will function as a benchmark for future research workers or any cognition searcher on the relevancy of IFRS in an emerging economic system like Nigeria, taking into awareness the assorted schools of idea examined in this field. It will besides edify the Nigerian populace and every bit good hike the assurance of possible investors ( be it foreign or local ) on how the acceptance of IFRS will supply credibleness to the fiscal coverage made by the fiscal establishments.
1.5.1 Structure of Nigerian Financial system
It is of import to give a brief description of the construction of Nigerian Financial system in this early portion of the research so as to hold a glance of what it entails. Afangideh and Olofin ( n.d. ) stated that the Nigerian fiscal system can be loosely divided into two sub-sectors viz. : the informal and the formal sectors. The informal sector comprises the local money loaners, the thrifts, salvaging associations, etc. This constituent is ill developed, limited in range, and non integrated into the formal fiscal system. Its exact size and consequence on the full economic system remain unknown. The formal fiscal system on the other manus can be farther subdivided into capital and money market establishments. This is shown in the diagram below:
Figure: Structure of Nigerian Financial System
Beginning: CBN 2010 Report
1.6 Structure of the Dissertation
This thesis is divided into five chapters.
The first chapter is the debut which includes background of the survey, research purpose and aims, statement of research job and inquiry, construction of Nigerian fiscal system, value of the research and construction of the thesis.
Chapter two focuses chiefly on literature reappraisal which comprises the globalization of IFRS and definition of cardinal footings, conceptual model and theoretical accounts, the thrust for IFRS by Nigerian fiscal establishments, old research and development of Nigerian accounting system.
Chapter three trades with research methodological analysis which encompasses research method, research scheme, research attack, restriction of the research and method of informations aggregation.
Chapter four considers the instance analysis and reading of findings. This consists of compatibility of Nigerian GAAP and IFRS, accounting differences between Nigerian GAAP and IFRS, change overing to IFRS: effects on Nigerian Banking.
Finally, Chapter Five is the decision and recommendation.
This chapter deals with analyzing the information and reading of the findings. This analysis involves informations collected from both primary and secondary beginnings associating to fiscal establishments in Nigeria. This research utilizes intercrossed method consisting both qualitative and quantitative methods. However, the qualitative method is the cardinal method while quantitative method is used to endorse some of the findings of the qualitative method. It is expedient to first see the compatibility of the Nigerian GAAP and the International fiscal Reporting Standards before measuring the chances and challenges the acceptance of the foreign criterions on the fiscal establishments.
4.2 Compatibility of Nigerian GAAP and IFRS
Before any logical state would see following a foreign accounting criterion, the first thing will be to look at the similarities and differences. If there are no differences, so acceptance would be of no huge value. With the coming of globalization, the universe ‘s capital markets have witnessed rapid enlargement, variegation and integrating. These alterations have brought a displacement off from local fiscal coverage criterions to planetary criterions ( Terzungwe, 2012 ) . It is of import to province here that no research work or even publication can make justness to the many differences in the inside informations that exist between IFRS and Nigerian GAAP. Harmonizing to Price Waterhouse Coopers Report ( 2011 ) , the major similarities and differences between the IFRS and Nigerian GAAP are shown in the tabular array below:
The chances of following IFRS by Nigeria represented an ample displacement in fiscal coverage for the state ‘s fiscal establishments because many demands in IFRS differ from those in the Nigerian GAAP. The acceptance of these foreign criterions has a batch of promising chances for the Nigerian fiscal establishments as they aim towards set uping their presence in the planetary markets. The assorted chances that necessitated the acceptance will be analysed below taking into awareness the responses from the interviewees coupled with some relevant articles in order to heighten credibleness.
4.3.1 Transparency and Credibility
One of the most outstanding points put frontward by the interviewees as a chief chance of following IFRS by Nigerian fiscal establishments is that it will heighten transparence and credibleness. Thirty per centum of those interviewed mentioned that deficiency of transparence and credibleness in the country of fiscal coverage by fiscal establishments in the state has contributed to the slow advancement of the economic system. Some of them clearly stated that this deficiency of transparence is as a consequence of hapless unity of the direction staff. They farther explained that the deficiency of transparence is in the country of proviso of unequal studies, printing fiscal statements on a extremely selective footing and non-disclosure of of import information that could act upon the users of fiscal statements. This response is corroborated by Dr Ngama ( 2012 ) , the former curate of province for finance in Nigeria, who highlighted that the failure of Bankss and other fiscal establishments is the deficiency of transparence, chiefly in signifier of use of figures and full revelation. Harmonizing to Omotoye ( 2011 ) transparence and credibleness are seen as of import ingredients in state edifice and formation of national character ; aid scholars better understand the kineticss of corruptness and keep the key to successful declaration of corruptness jobs. With the acceptance of IFRS, Coker ( 2012 ) stated that Nigerian fiscal establishments can be seen to keep their ain in the international market and at the same clip compete favorably. He added the fiscal sector must be seen to follow with the new transparence criterions under IFRS in order to accomplish their aims.
However, two of the respondents are of different sentiments that they do non believe the acceptance of IFRS will make any more transparence than the local accounting criterions. They believed that transparence is non a map of the accounting criterions but the preparers of the fiscal statements.
4.3.2 Boost Reputation in the foreign market
Another chance highlighted by the interviewees is the boosting of the repute of Nigerian fiscal establishments in the foreign market. A statement from one of the interviewees read: ‘Nigeria and everything Nigerian including fiscal establishments have lost their repute in the international market merely because of our bad leading and falseness in footings of readying and presentation of fiscal statements. He farther stated that no Nigerian company wants to be associated with by foreign investors merely because of deceitful act linked with Nigerians who are top functionaries in the so called reputable companies in the state. ‘
Sixty per centum of the interviewees strongly agree that boosting of repute of fiscal establishments in the international market is the chief chance of the acceptance of IFRS in Nigeria. They believe that if fiscal statements are prepared under a planetary accounting criterion, there will be less use of figures which will unwittingly advance good image of the Nigerian companies in the foreign market. To back up this statement, Ramanna and Sletten ( 2009 ) argued that states choose to follow IFRS when they expect to increase the portion of foreign capital and trade in their economic system: expected foreign engagement in an economic system can do current acceptance of international criterions more attractive. They added that fiscal establishments with low degrees of foreign capital and trade can take to follow IFRS if they are anticipating growing in those factors.
4.3.3 To promote foreign investors
This is another critical chance the respondents see can non be overlooked. In their sentiment, they mentioned that the chief principle behind following IFRS is to promote foreign investors. This prospect portion the same per centum with the chance mentioned above in the information collected. Sixty per centum of the respondents are of the sentiment that with the acceptance of IFRS by fiscal establishments, foreign investors will be encouraged to put in the companies because studies are clearly written in conformity with the foreign criterions that they understand. Some of the respondents acknowledged that foreign investors ‘ assurance will be boosted because fiscal statements of possible companies can be compared with other similar companies in the foreign market. To confirm this statement, Ali et Al. ( 2009 ) wrote that abroad investors are frequently hesitating to put in companies runing in emerging economic systems due to the deficiency of transparence and deficiency of credence of internationally recognised coverage criterions. Ogunwale ( 2011 ) buttressed the point that the acceptance of IFRS by companies runing in both private and public sectors would hike the investing clime in Nigeria. Foreign investors want fiscal statements that are comparable with those of similar concerns in other parts of the universe, for strategic determination devising in relation to amalgamations and acquisitions. Many foreign investors will necessitate their subordinates in Nigeria to describe in conformity with IFRS so that the parent company can follow with its coverage demands in its place district. Similarly, the deduction of the new coverage format is that Bankss and other establishments are at the terminal of the fiscal twelvemonth expected to ship on full revelation of their activities to the extent that it should be apprehensible to both the stockholders and investors, while at the same in conformity with international best pattern ( BusinessDay, 2012 ) . This means that fiscal statements prepared under international fiscal coverage criterions will be more dependable than Nigerian GAAP.
4.3.4 To cut down degree of corruptness
Another critical point raised by the interviewees is that with the acceptance of IFRS the degree of corruptness among top direction functionaries in fiscal establishment will be reduced. Five per centum of the people interviewed clearly pointed out that corruptness may non be wholly eradicated from the fiscal system but to a sensible extent will be reduced. During the interview, mention was made to the bagging of corrupt bank main executives by the Central Bank of Nigeria governor. In their sentiment, the interviewees believed that if there had been a more concise and crystalline accounting criterions than the local criterions, the deceitful activities perpetrated by the Bankss ‘ top officers would non hold been possible. One interviewee explained that in a position to contend corruptness in the state, particularly among top officers in noteworthy companies, is one of the principles that made the Federal Government of Nigeria to mandate companies to follow IFRS. He farther stated ‘the more rigorous commissariats in IFRS can turn to originative accounting that Nigerian GAAP is susceptible to. ‘ Onwubuariri ( 2012 ) stated that contending corruptness is non easy and since IFRS will guarantee an accounting system that will checkmate corruptness and fraud, there is outlook that non all stakeholders will be satisfied with its acceptance. It is observed during the class of this research that there are some IFRS models which Nigerian GAAP has no guidelines. For case, the Price Water House Report ( 2011 ) reveals that no counsel exists for non-current assets held for sale or disposal group, fiscal liabilities categorization, exchangeable instruments and other critical accounting minutess under the Nigerian GAAP comparison to IFRS. These are countries susceptible to pervert patterns.
4.3.5 To ease cross boundary line exchange listing
Kip ( 2007 ) defines transverse boundary line listing ‘as the listing of securities issued by a foreign issuer on a domestic securities exchange. ‘ He added that the grounds for this cross boundary line exchange is for companies to hike their position as a truly planetary participant, increase trading volume and better stockholder dealingss. Five per centum of the letter writers admitted that acceptance of IFRS would heighten cross boundary line exchange naming which may non be possible with Nigerian GAAP. They added that with IFRS in topographic point, the obstructions like differences in accounting criterions, unequal fiscal information to traverse boundary line exchange listing will be removed because of the uniformity in the accounting criterions. In a similar research conducted in India, with a parallel turning economic system like Nigeria, it was observed that IFRS will extinguish encirclements to traverse boundary line listing and would be good for the investors who by and large attributed to put on the line premium if the underline fiscal information is non prepared in conformity with international criterions ( Ray, 2012 ) .
The overall chances of IFRS acceptance by fiscal establishments responses from the research questionnaire distributed are shown in the tabular array below coupled with a pie chart:
Table: Percentage distribution of responses of respondents on the chances of IFRS acceptance by Nigerian fiscal establishments
Ranking harmonizing to % of respondents
1Transparency and credibleness
2 To hike their repute in the foreign market
And besides promote foreign investors
3 To heighten international comparing
4 To cut down degree of corruptness
5To facilitate cross boundary line exchange listing
Figure: Prospects for the acceptance of IFRS by Nigerian fiscal establishments
4.4 Challenges of IFRS acceptance by Nigerian fiscal establishments
The acceptance of IFRS nowadayss many challenges particularly for many developing states. Ehijeagbon ( 2010 ) wrote that the convergence to a individual set of globally accepted high quality criterions is critical to economic growing and finally in the best involvement of the populace, it is indispensable for all the stakeholders to see the demand for their operation in get the better ofing the attender challenges that semen with the acceptance and execution of international fiscal coverage criterions. These challenges are analysed below:
4.4.1 Cost factor
The first challenge put frontward by the interviewee is the cost of execution factor. Fifty per centum of the responses from the questionnaire mentioned that there are assorted costs associated with the execution of the foreign criterions runing from cost of preparation and cost of replacing Nigerian GAAP bundles with IFRS bundles. In their sentiment, they believe the cost of engaging IFRS trainer, making a contributing environment for the execution and altering the local statement of accounting criterions packages to IFRS bundles will hold a large impact on the net incomes of the fiscal establishments. In support of this position, Terzungwe ( 2012 ) highlighted that meeting to IFRS has a immense cost spending which include the cost of developing forces to understand the new planetary criterions, cost of geting new accounting bundles that are needed for the execution, cost of flinging former accounting bundles that are non compatible with IFRS. Madawaki ( 2012 ) added that professionals ( comptrollers, fiscal analysts, hearers, revenue enhancement practioners, regulators, stockbrokers and accounting lectors ) are all looked upon to guarantee successful execution of IFRS which may turn out dearly-won to small-size fiscal establishments. He farther stated that developing stuffs on IFRS are non readily available at low-cost costs in Nigeria to develop such a big group which poses a great challenge to these fiscal establishments in following IFRS.
However, twenty five per centum of the respondents are of different sentiment that cost can non be a ambitious factor to fiscal establishments taking into awareness their fiscal strength. They asserted that bulk of the state ‘s fiscal establishments have the fiscal capableness to get the better of the cost factor which is evidenced in their published fiscal statements ; although their reported net incomes may be somewhat affected in the short term but will be recupperated in the long term. An statement in favor of these respondents ‘ sentiment was pointed out by Chadha ( 2010 ) that fiscal establishments with the purpose to travel planetary will see cost as a benefit alternatively of a challenge because all their concern units/investments will be on a common accounting platform.
4.4.2 Lack of forces
Thirty per centum of the responses from the questionnaire showed that fiscal establishments in Nigeria do non hold the right forces to implement the IFRS. They are of the sentiment that most of these fiscal establishments ‘ staffs are neither comptrollers nor hearers, thereby doing it hard to rapidly accommodate to the new accounting system. They added that some of the comptrollers in the fiscal administrations are non IFRS compliant because they are locally qualified. Oduware ( 2012 ) emphasised that the mean comptroller in most entities in Nigeria lacks apprehension of advanced fiscal direction techniques for case fiscal instruments rating, impairment analysis prediction etc. This has slowed down the coverage procedure. These fiscal instruments are indispensable minutess of most fiscal establishments globally. In the class of this research, it is observed that deficiency of right and equal forces is major quandary for most rising economic systems. The Minister of Finance in Nigeria, Mrs Ngozi O. Iweala ( 2011 ) acknowledged the fact that despite some preparation programme on the set of International criterions organised by some fiscal houses in this class, they have non truly acquire to the phase of implanting IFRS into their systems and procedure, even as some insisted that most of the companies in the state have no thought of how to travel about the IFRS. Besides, Adam ( 2009 ) cited a recent survey conducted by the United Nations Conference on Trade and Development ( UNTAD ) indicates that there is serious deficit of forces in developing states that have the basic accomplishments and experience to implement IFRS. This therefore makes it important for the issue of skill spread to be tackled at the really outset in our IFRS passage.
In contrast to the above position, 20 five per centum responses indicated that Nigerian fiscal establishments have the people it takes to implement the international accounting criterions. In a similar mode, some responses from the interview conducted besides supported this impression that there are qualified staffs in fiscal administrations that possess the necessary accomplishments to implement the IFRS, although they may necessitate to update cognition.
4.4.3 Lack of substructure
This is another challenge forestalling the smooth flow of the execution of IFRS by fiscal establishments in Nigeria as mentioned by some of the interviewees. Ten per centum of the responses received agreed that most Nigerian companies lack the proper substructure to efficaciously transport out the executing of the foreign criterions. Mwaura and Nyaboga ( 2009 ) wrote that more than a half of all African states do non hold the functional accounting administrations to ease the executing of the IFRS. They added that International Financial of Accountants ( IFAC ) faces the dashing undertaking of helping these developing states to first develop functional professional accounting administrations. Similarly, O.Ailemen and Akande ( 2012 ) argued that some of the obstructions to full execution of IFRS are the absence of preparation installations and academic course of study in school. They besides pointed out that hapless describing systems are besides indicant of hapless substructure.
On the contrary, 40 five responses disagreed with the above mentioned point. They strongly believed that Nigerian fiscal establishments have the proficient know-how to Implement IFRS. They added that without proper substructure in topographic point, they would non hold been mandated to follow IFRS in the first topographic point. In their position, it is upheld that most Nigerian accounting criterions are a reproduction of International fiscal coverage criterions, except for few criterions that are amended to accommodate the state ‘s environment. This statement is supported by Iyoha and Jafaru ( 2011 ) which declared that there are strong institutional substructure to do the passage to IFRS effectual and honoring like accounting organic structures ( ICAN and ANAN ) , Central Bank of Nigeria ( CBN ) , Securities and Exchange Commission ( SEC ) , Nigerian Accounting Standards Board ( NASB ) .
4.4.4 Political and cultural factor
Politicss and civilization is besides one of the ambitious factors for acceptance of IFRS by fiscal establishments in Nigeria, as most companies are being regulated by governmental organic structures. Government, in both developed and undeveloped states play of import portion when it comes to doing determinations that affect the critical portion of the state ‘s economic system. The acceptance of IFRS is of great significance to Nigeria which makes the function of the authorities inevitable. Ten percent responses confirmed that political and cultural factor is another ineluctable challenge in the Nigerian sector. The political factor is seen to be a challenge as explained by one interviewee due to miss of continuity when there is alteration of political power, which might hold a negative consequence on the activities of the fiscal sector. He stated that a new authorities might take over and non be in support of the IFRS due to the hapless construction of the political scene… With respects to civilization, Jones et al. , ( 2009 ) stated that incorporating global cultural differences to guarantee that IFRS are applied and interpreted systematically is certain to be a hard undertaking. The direction civilization in most fiscal establishments in footings of compensation program would hold to be changed due to the differences in footings and conditions of Nigerian GAAP and IFRS ( Ailemen and Akande, 2012 ) . This tends to be a great challenge as most of the top officers feared that the footings and conditions of IFRS might be less favorable.
However, five per centum of the responses were of different sentiment that the political relations and civilization may present no challenge as the Nigerian authorities is more than prepared to guarantee the smooth passage from the local GAAP to IFRS. To confirm this sentiment, Omankhanlen ( 2010 ) reported that the Federal Government of Nigeria is in support of the acceptance of the foreign criterions because it will ease rapid economic development as explained by the state ‘s Minister of Commerce and Industry in a acme organised by NASB. In add-on, the Financial Reporting Council of Nigeria, a federal authorities bureau, has concluded the agreements for the constitution of IFRS academy as a platform the development of modern-day accomplishments sets in all facets of accounting and fiscal coverage amongst preparers, users, regulators and hearers of fiscal study, and the instruction and acquisition of IFRS in Nigeria and Africa ( Financial Reporting Council of Nigeria, 2012 ) .
The overall responses on the challenges of IFRS acceptance by Nigerian fiscal establishments are depicted in the tabular array and graph below:
Table: Percentage distribution of responses on the challenges of IFRS acceptance by Nigerian fiscal establishments
Ranking harmonizing to % of respondents
2. Lack of forces
3. Lack of substructure
4. Political and cultural factor
Figure: Challenges of IFRS acceptance by Nigerian Financial Institutions
4.5 The Impacts of IFRS acceptance
Harmonizing to Liu et al. , ( 2011 ) as more states consider the acceptance of International fiscal coverage criterions ( IFRS ) that are based on patterns prevalent in the English-speaking states with free markets, it is progressively indispensable to understand the impacts of IFRS on some outstanding countries of the fiscal establishments like scrutinizing of the fiscal statements, corporate administration and information engineering. Each of these countries will be analysed below based on the responses from the questionnaire, the interview conducted and relevant articles.
4.5.1 Impact of IFRS on corporate administration
It is of import to give a brief description of what corporate administration entails in order to understand the consequence IFRS acceptance will hold on it. Corporate administration is referred to as processs and processes harmonizing to which an administration is directed and controlled. The corporate administration construction specifies the distribution of rights and duties among the different participants in the organisation-such as the board, directors, stockholders and other stakeholders- and lays down the regulations and processs for determination devising ( OECD, 2005 ) .
Sixty per centum responses indicated that with the execution of IFRS, there is likeliness that the corporate administration gettable in the foreign companies where IFRS is in topographic point might be imbibed into the Nigerian fiscal system. Similarly, one of the interviewees pointed out that for IFRS to be effectual in the fiscal Institutions, there is demand for good structured corporate administration. Nkiru ( 2011 ) cited that the recent events affecting the much publicized corporate administration failure in Nigerian banking sector reveal common tendencies in the affected establishments ; the noticeable tendencies involved hapless corporate administration civilization, typified in hapless direction which led to fraud, insider maltreatment by direction and board members, weak internal controls and supervising, among other things. She added that the debut of IFRS will heighten dependable fiscal information and audit quality confidence thereby hiking assurance in the corporate administration in Nigerian fiscal establishments. This indicates that there will be need for fiscal establishments whose administration construction is non aligned with planetary criterions to either alteration or amend it.
4.5.2 Impact of IFRS on fiscal statements audit
The impact of IFRS on the audit of fiscal statement can non be overemphasized. Questions 10 and 11 of the study conducted show that 30 per centum of the responses agreed that the acceptance of IFRS will do scrutinizing much easier for the hearers. It is noted that the large auditing houses ( PWC, KPMG and Deloitte ) in Nigeria are transnational that are IFRS compliant already. So following IFRS by Nigerian fiscal Institutions will do it much easier for these auditing houses to utilize any of their forces to scrutinize the fiscal statements instead than utilizing merely those who understand the Nigerian GAAP. This denotes that the acceptance will promote the rotary motion of audit spouses without much emphasis, since fiscal statements are prepared in conformity with the planetary criterions. Onafalujo et al. , ( 2011 ) wrote that IFRS emphasises the readying of histories be instilled with human qualitative values that determines the quality of history in footings of: materiality, relevancy, comprehensibility and comparison.Being an comptroller, the research worker reasoned that with the transparence and full revelation the acceptance of IFRS will convey to the fiscal statements, less audit processs may be required during scrutinizing. In a statement made by the Minister of finance in Nigeria, Mrs Ngozi O.Iweala ( 2011 ) , she mentioned that the convergence to IFRS, which comprises of principle-based criterions and readings, is expected to convey about uniformity in operations and scrutinizing of companies. She added that it is expected to hold important impact on houses ‘ fiscal place and fiscal public presentation.
4.5.3 Impact of IFRS on Information engineering
The way to IFRS as discussed earlier in this chapter will take to alter in the usage of accounting bundles from the local to the International. These bundles are chiefly package associating to information system. Ten percent respondents coupled with responses from some of the interviewees specified that most accounting informations are performed utilizing IT package ; and with the execution of IFRS, there may be an inspection and repair of the current accounting bundle to let the easy procedure of the accounting minutess. Bastos ( 2009 ) cited that the largest impact of IFRS related regulation or logic alterations is on those IT systems responsible for the categorization, processing and poster of fiscal minutess. He farther stated that most finance companies today rely on one or more Enterprise Resource Planning ( ERP ) systems to treat their fiscal accounting records and fix their fiscal statements. In the same manner, finance companies worldwide have spent considerable clip, money, and other resources to change over to IFRS- and many of them report that a significant constituent of their transition costs were IT related ( KPMG, 2008 ) . In a study by Aladenusi ( 2012 ) , she mentioned that general proviso of 1 % on executing loan already configured on Bankss ‘ IT systems may necessitate to be replaced by specific proviso while the current provisioning method for non executing loans may be replaced by beginning systems that captures the consequence of damage trials harmonizing to IAS 39. She farther cited that IT systems should be broken down and recognises information constituents of belongings, works and equipment in line with IAS 16.
The per centum of responses on the Impact of IFRS acceptance is shown in the saloon chart below:
Figure: Impacts of IFRS Adoption
4.6 Benefits of IFRS Adoption to both Local and Foreign Investors
IFRS may look excessively disputing in the short tally particularly for first clip adoptive parent like Nigeria, but in the long tally there are huge benefits associated with its acceptance. These benefits will be considered from the points of both local and foreign investors, who are normally the marks of these fiscal administrations. These benefits will be discussed briefly below:
4.6.1 Benefits to Foreign Investors
Most fiscal establishments in Nigeria have subordinates in other states utilizing different accounting criterions or IFRS. With the acceptance of IFRS there will be improved communicating among subordinates due to a cosmopolitan accounting linguistic communication which can better direction coverage and determination devising ( Deloitte, 2011 ) .The acceptance of IFRS by the fiscal sector will heighten easy consolidation of fiscal information of the same company with subdivisions in different states ( Agboola, 2012 ) . Having fiscal statements prepared in a cosmopolitan accounting linguistic communication will undisputedly hike the assurance of the foreign investors as noted by one of the interviewees.
4.6.2 Benefits to Local Investors
The acceptance of the IFRS will guarantee better working conditions for fiscal Institutions ‘ employees in Nigeria because one of its criterions screens employee benefits ( IAS 19 ) while the Nigerian GAAP merely addresses retirement benefits ( KPMG, 2008 ) .Most Nigeria employees do hold portions in the company they work for as observed by the research worker, this new criterion will at that place promote end congruity because the benefits of the investors are taken into awareness.
Responses to oppugn five of the interview inquiries revealed that local investors ‘ assurance will be boosted due to the fact that the acceptance of IFRS will supply more credibleness than the Nigerian GAAP. It is besides observed that with full revelation of relevant information as a compulsory demand of the IFRS, local investors will be extremely confident of whatever investing determinations they make.
Chapter FIVE: Decision AND RECOMMENDATION
To get down with, it is of import to re-state the overall purpose of this research which is to measure the chances and the challenges of acceptance of IFRS by fiscal establishments in Nigeria. This subdivision will reconsider the research objectives stated in subdivision 1.3, summarise the findings of this research work and offer decision based on the findings. Besides recommendations for future research will be discussed.
5.2 Summary of findings and Decision
Research Question 1: What are the impulsive factors and likely restraints the acceptance of IFRS will enforce on the fiscal Institutions in Nigeria?
It is observed in the class of this research that one of the principles for the acceptance of IFRS by developing economic systems is to guarantee transparence in the readying and presentation of fiscal statements. This peculiar ground of transparence is seen to be one of the chief drivers why the acceptance of IFRS is embraced by Nigerian economic system. Section 4.3.1 clearly addressed the first aim which was to analyze if transparence was the principle for the acceptance of IFRS by Nigerian fiscal establishments. The responses from both the questionnaire and interviewees clearly indicate that the acceptance of IFRS by these establishments will guarantee full revelation of the necessary information in the fiscal statements, which is non required under the Nigerian GAAP.
Besides noted from the responses, relevant articles and addresss made by noteworthy and experient IFRS inclined forces in Nigeria, it is observed that the acceptance of the foreign criterions by these establishments may look dearly-won at present but the long term benefits are unquantifiable. In order to turn to the 2nd aim, careful analysis of the interview responses shows that the execution of IFRS will pull foreign investors and besides promote cross boundary line listing as stated in the 4.3.3 and 4.3.5 subdivisions which have been the major chances of Nigerian fiscal establishments. This denotes that IFRS acceptance will supply speedy and easy entree for Nigerian establishments to come in foreign market ; accordingly the overall benefits outweigh the cost.
In drumhead, the corporate consequences from the study and interview responses as explained above gave an expressed reply to the first research inquiry. This means that the attendant factors for the acceptance of IFRS by fiscal establishments are to guarantee transparence, promote foreign investors, remotion of barriers to traverse boundary line listing ; while the restraints are-cost of execution, political relations, deficiency of forces and substructure.
Research Question 2: What impacts would IFRS acceptance have on the fiscal statements and other indispensable countries of the fiscal system?
The consequences of the survey prove that with the execution of IFRS, fiscal statements will be prepared and presented in a much clearer mode which will help better apprehension. This signifies that countries non addressed by the local GAAP are clearly dealt with under international fiscal coverage criterions ( IFRS ) . It is deduced from the responses and relevant articles that IFRS will heighten full revelation of relevant information of the fiscal statements n conformity with IAS 1 which had been one of the major failings of the local GAAP. For case countries associating to fiscal liabilities categorization and equity instruments have no counsel under Nigerian GAAP as discovered in the class of this research, which are cardinal to fiscal establishments. Another of import impact on the fiscal statement as inferred from the interview responses shows that degree of originative accounting or use of figures will be reduced to the barest lower limit if non wholly eradicated. This is because the fiscal histories are prepared in a linguistic communication understood by both local and foreign investors.
A compendious reappraisal of the findings besides indicates that impact will besides be felt in the undermentioned countries: corporate administration, fiscal statements audit and information engineering. The benefits to both local and foreign investors were briefly considered in footings of sweetening of assurance and credibleness.
In drumhead, replying the 2nd research inquiry above helped in turn toing the last two aims which were: rating of the impacts the acceptance of IFRS will hold on relevant countries of the fiscal studies and besides the geographic expedition of the possible benefits local and foreign investors will deduce from the IFRS acceptance.
5.3 Restrictions of Study
There are several restrictions experienced in the class of this research which emanated as a consequence of the method of informations aggregation. The usage of both primary and secondary beginnings poses their challenges as will be discussed below.
First, the instance survey chosen is an economic system where less research is being undertaken thereby restricting the handiness of informations from that beginning. In add-on, research on the acceptance of IFRS in the fiscal sector has non been undertaken prior to this research work, thereby doing it a bit boring for the research worker to obtain relevant informations.
Second, the usage of online questionnaire tends to do a hold in completion of the research due to late responses from the respondents. Aside the late responses, some respondents did non answer without any plausible grounds. This non response therefore limits the profusion of the information obtained.
Third, the interviews conducted via the phone and other societal webs chosen were non expressed due to the limited clip. Besides, the telephone interview was non allowed to be recorded for confidentiality ground best known to take interviewees.
Finally, the acceptance of IFRS has merely late been adopted in Nigeria thereby restricting the range of the research.
In order to guarantee that the full benefits of IFRS acceptance accrue to Nigerian fiscal establishments, the research worker would therefore urge the followers:
IFRS should be incorporated into the organizational civilization. This will make continual consciousness and acquaintance with the new accounting criterions. In add-on it will enable the establishment to do proviso for preparation installations.
An IFRS conformity officer should be nominated. This officer is to function as a alteration agent as described in Lewin ‘s alteration theoretical account to forestall the establishment from falling back to the local GAAP. This officer is to guarantee that regular preparation is conducted to consequence any update in the international fiscal coverage criterions.
5.5 Further Research Suggestion
Nigeria, being a first clip adoptive parent of IFRS has provided a foundation for promotion of research in different countries of the state ‘s economic system aside the fiscal sector. Below are suggestions for farther research:
An probe of the countries of the International Financial Reporting criterions ( IFRS ) that is relevant to fiscal Institutions. This is of import because IFRS cut across all sectors of the economic system like agribusiness, fabricating etc.
An appraisal of the chances and challenges of IFRS acceptance in a peculiar sector of the fiscal system like: Insurance, Nigerian Stock Exchange and Pension Companies. Research in this country will streamline the focal point to a individual section of the fiscal sector instead than generalizing the consequences as done in this research.