SOURCE:

Faculty: Management Sciences
Department: Accountancy

CONTRIBUTORS:

Okeke, P. C.
Ekwueme, C. M.

ABSTRACT:

The study ascertained the effect of International Financial Reporting Standards (IFRS) adoption on financial ratios of manufacturing firms in Nigeria. The study specifically evaluated six categories of ratios: activity ratios, cash flow ratios, growth ratios, liquidity ratios, leverage ratios, and profitability ratios computed under IFRS and Ng-GAAP regimes. The study is anchored on corporate disclosure theory. The study made use of Ex-post Facto Research Design. The population of the study is made up of eighty-eight (88) manufacturing firms quoted on the floor of the Nigerian Stock Exchange (NSE) as at end of 2011 and 2012 financial years. Five companies in the agricultural sector, thirty-three companies in the consumer goods sector, six conglomerates, ten companies in the health care products sector, eleven companies in information & communication technology, and twenty-three companies in the industrial goods sector. The study employed two statistical techniques in validating the hypotheses, the Independent Samples Mann-Whitney U Test for variables found to be non-normal, while independent samples t-test was applied to variables found to be normal. Simple linear regression was used to test for dependence of the ratios, that is, if the Ng-GAAP ratios were significant in explaining the variation in the IFRS ratios. The study finds significant variation between activity ratios, cash flow ratios, growth ratios, liquidity ratios, leverage ratios, and profitability ratios of manufacturing firms computed under IFRS and Nigerian GAAP (SAS) regimes. Based on this, the study recommends a country specific re-assessment of the standards before adoption due to considerably differing cultural, legal, environmental and social arena. A focus on relevance of financial information than overload. The standards need to be streamlined to focus on relevant areas in financial reporting and presentation rather than an overload of information which may affect the understandability and relevance of such information to stakeholders involved in financial reporting. Finally, the comprehensive review of the qualitative features/characteristics of financial statements.