SOURCE:

Faculty: Management Sciences
Department: Accountancy

CONTRIBUTORS:

Avwokeni, A. J.
Okoye, E. I.

ABSTRACT:

Nigeria abandoned its national accounting standards for the International Financial Reporting Standards, or the IFRS, in 2012. The purpose of this study, therefore, is to detect the impact of the accounting change on the financial statements and the accounting quality. The research variables associated with the financial statements are the aggregate assets, liabilities, equity, earnings and their ratios whilst those associated with accounting quality are market value relevance of accounting information, opportunity to manipulate earnings to cover up poor cash flow from operations, compliance with the capital maintenance doctrine, and economic growth. The overall aim is to provide empirical evidence which either justifies a holistic adoption of the IFRS or the need to adapt the IFRS to suit the cultural and economic development of Nigeria. This objective is significant because prior studies detect that African countries that adapted the IFRS experienced higher economic growth than those that adopted the IFRS. The design is experimental: companies report their operations using Nigerian Statements of Accounting Standards, and re-report the same operations using the IFRS (via IFRS 1), leading to repeated measurement. Data were gathered from annual report and accounts of companies listed on the Nigerian Stock Exchange to measure the research variables for analysis to clinch the expectations of the study. The study detects, inter alia, that the transition to the IFRS increased companies’ assets; however, indebtedness of companies also increased. Although market value relevance of accounting information increased, the IFRS accounting policies offer vast opportunity to managers of companies operating in Nigeria to manipulate earnings to cover up poor cash flow from operation or reduce tax liability to the Nigerian Government; and most importantly, IFRS accounting policies reduce Nigerian Gross Domestic Product. Moreover, fair value accounting of the IFRS is subjective though managers do not pay dividends from fair value profit or gain. The study recommends, therefore, that the Financial Reporting Council of Nigeria should adapt the IFRS accounting policies to suit the peculiarity of the Nigerian economy for higher economic growth rather than holistic adoption.

Keywords: Earnings Management, Value Relevance, Corporate Social Reporting, Financial Ratios, Normal distribution, Fair Value Accounting, Capital Maintenance, Conservatism concept, Value Added.