1.1 BACKGROUD OF THE STUDY
In the past few years, many developed and developing countries have adopted international financial Reporting Standards (IFRS) as the basis for financial reporting. This is because globalization of capital market is an irreversible process, and there are many potential benefits to be gained from mutually recognized and prospected international accounting standards. The move towards developing an acceptable global high quality financial reporting standard started in 1973 when the International Accounting standards committee (IASC) was formed by professional Accounting bodies from Canada, USA, United Kingdom, Germany, France, Neitherland, Australia, Mexico and Japan. The IASC was to formulate uniform and global accountings aimed at reducing the discrepancies in International Accounting principles and reporting practices. In this light, the IASC was established and has actively been championing the uniformity and standardization of accounting principles for the past few years. In April 2001, the IASC was reorganized into International Accounting standard Board (IASB). Thenceforth, the IASB has updated the already existing International Accounting Standards and referred to them as International Financial Reporting standards (IFRS). IFRSs are single set of high quality understandable standard for general purpose of financial reporting which are principles based in contrast to the rules based approach.
While some countries have been using these standards for decades, they are however new for transition economies like Nigeria. In Nigeria, implementation IFRS was launched in September 2010, but the successful adoption and implementation of these standards remain a mirage in Nigeria. The adoption was organized such that all the stakeholders will use the IFRS by January 2014. The adoption was scheduled to start with public listed entities and significant public interest entities who are expected to adopt the IFRS by January 2012. All other public interest entities are expected to mandatorily adopt the IFRS for statutory purposes by January 2013 and small and medium sized entities shall mandatorily adopt IFRS by January 2014, (Jubril and Michael, 2010). The light of this therefore, this study focused on the process of adopting the IFRS in Nigeria as a developing economy, the benefits and the challenges of IFRS, bearing in mind the prevailing domestic legal and regulatory framework.
1.2 STATEMENT OF THE PROBLEMS
The statement of the problems of this research work among others was as follows:
- High cost of the first time implementation of IFRS
- Low level of public awareness for preparers and users of financial statements, regulators, educators, auditors and other stakeholders.
- Difficulty in understanding the impacts of IFRS on various sectors of the economy and their economic operations respectively.
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to analyze the challenges facing the implementation of IFRS in the Nigerian Money Deposit Banks.
Specifically, the study seeks to:
- ascertain if the first time implementation of IFRS is costly and expensive.
- examine the level of public awareness by the stakeholders in the use of these standards.
- examine the influence of existing Nigerian laws on the smooth transition to IFRS.
1.4 RESEARCH QUESTIONS
The focus of this study is to evaluate the implementation challenges facing the adoption of the International Financial Reporting Standard among the Nigerian Money Deposit Banks. And also answers will be provided to the following questions.
- Is the first time implementation of IFRS costly and expensive?
- What is the level of public awareness of stakeholders on these standards?
- Does existing Nigerian laws has any influence on the smooth transition process to IFRS?
Taking into consideration the nature and extent of the problems stated so far, it is necessary to formulate the following hypotheses:
Ho1: First time implementation of IFRS is not expensive and costly.
Ho2: IFRS public awareness is not very low among all the stakeholders in Nigeria.
Ho3: There is no any significant influence of existing Nigerian laws on the smooth transition process to IFRS.
1.6 THE SCOPE OF THE STUDY
This study focused on the evaluation of the challenges facing the adoption of IFRS in the Nigerian Money Deposit Banks with special emphasis on Guaranty Trust Bank plc. in Ilorin metropolis.
1.7 JUSTIFICATION FOR THE STUDY
In today’s dynamic and globalization of accounting and financial information and interpretation, openness and transparency in annual reporting on an unprecedented scale may be inevitable with the use of International Financial Reporting Standards (IFRS). Increasing demands for financial reporting accuracy and transparency, coupled with growing complexity and volume of accounting standards and regulations all over the world, have put a premium on ongoing global convergence efforts and Nigeria’s commitment to adopt IFRS, (Jubril, 2010).
With the IFRS implementation ongoing in Nigeria, this study is therefore aim to assess the implementation challenges facing its smooth adoption, using the Nigerian Banking sector as a case study. This information can be of immense benefits to other companies implementing IFRS in Nigeria, the relevant stakeholders as well as standard-setters and regulators around the world.
Researchers and students in other developing countries which are yet to adopt the IFRS may also find this study relevant in knowing the likely implementation challenges that their countries may encounter in adopting the Standards. Also finding of this study will contribute to the pool of information needed in making relevant economic policies both in Nigeria and any other part of the world.
1.8 OUTLINE OF THE STUDY
The study was structured into five chapters. Chapter one focused on the introductory aspect of the study. Chapter two presented the literature review on the subject matter. Methodology adopted in the study was stated in chapter three. Chapter four presented the data, results and the findings of the study. Finally, chapter five gave the summary, conclusion and appropriate recommendations based on the findings from the study.
1.9 DEFINITION OF TERMS
- IFRS: Means International Financial Reporting Standards. It represent a unified global commitment to developing a single set of high quality, globally accepted accounting standards whose aim is to provide transparent and comparable information that is in the public interest through general purpose financial statements (Herbert, 2010).
- Convergence: Convergence means the process of converging or bringing together international standards issued by the IASB and existing standards issued by national standard setters, with the aim of eliminating alternatives in accounting for economic transactions and events (Odia and Ogiedu, 2013)
- Adoption: Adoption implies that national rules are set aside and replaced by IFRS requirement. Adoption of IFRS means full scale implementation or usage of IFRS without any variation.
Comparison: This is the means of assessing the similarities between the financial statements prepared in different parts of the world. Without a common set of accounting and financing reporting standard it would be difficult to compare financial information prepared by entities located in different parts of the world.
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