SOURCE:

Faculty: Management Sciences
Department: Accountancy

CONTRIBUTORS:

Inaya L. Salubi
Okaro S. Chukwunedu
Okoye Emma

ABSTRACT:

As a result of globalization and the integration of capital markets across the globe, the objective of comparability which financial statements were designed to achieve seemed to have been threatened. This has led to the general call for the adoption of uniform worldwide accounting standards as a global language in financial reporting. Following the adoption of IFRS, one unresolved problem had bordered on whether Nigeria’s decision to adopt IFRS came as a quick fix or major overhaul of financial reporting practices among highly regulated entities like banks. This study therefore, sought to assess the effect of the adoption of International Financial Reporting Standards (IFRS) on financial reporting of Deposit Money Banks in Nigeria. The secondary data on Net Interest Margin (NIM), Return on Asset (RETOA), Return on Equity (RETOE), Liquidity Ratio (LIQ), Cash to Deposit Ratio (CAPADQR) and bank size (SIZE) spanning the period 2006-2015 utilized in the study were extracted from the Published Annual Reports and Accounts and Nigerian Stock Exchange Factbook. To assess the effect of the adoption of IFRS on financial reporting of Nigerian banks, the regression analysis method was employed. However, the analyses were done via windows software – STATA 13.0 version. The findings show that the adoption of IFRS by Nigerian banks significantly affects their net interest margin, return on asset, return on equity, liquidity ratio, and cash to deposit ratio. Thus, the study concludes that the IFRS significantly and positively influence financial reporting of banks in Nigeria. Since a positive correlation was found between IFRS adoption and financial reporting components of Nigerian banks, the study thus recommends the need to strengthen and institute strict punitive measures and/or sanctions for non-compliance with the provisions of IFRS and their subsequent updates. Furthermore, banks should be closely monitored by regulatory bodies to the extent that all provisions and subsequent updates and revisions to IFRSs are fully implemented to avoid detrimental effects of asymmetric information to the sector. Following significant effect of IFRS adoption on reported accounting variables (net interest margin, return on equity and return on asset), we also recommend among others that Nigerian banks should have a closer watch on the trends of financial reporting in the sector in order to consistently and at all-time improve their reporting systems.