– Adoption of International Financial Reporting Standards and Performance Reporting of Nigerian Deposit Money Banks –
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ABSTRACT
The main objective of the study involved the assessment of the impact of the adoption of on the performance reporting of Nigerian Deposit Money Banks using financial ratios.
While the specific objectives involved the examination of the effects of the adoption of IFRS on the reported profitability measured by (ROE), on the reported liquidity, measured by current ratio (CR), on the reported gearing ratio measured by Total Deposit to Equity (TDE), and on the reported interest cover measured by (FCC) of the Nigerian Deposit Money Banks.
The globalization of business had necessitated the introduction of International Financial Reporting Standards (IFRS) in order to present a globally accepted and high quality financial statements which will provide reasonably accurate information about a company’s financial performance to investors and other interested parties.
However, accounting under IFRS and pre-changeover hampers the consistency of information in the financial statements due to the application of fair value accounting and thus affects the performance of Nigerian Banks.
TABLE OF CONTENTS
Content Page
Title Page i
Certification ii
Dedication iii
Acknowledgements iv
Abstract v
Table of Contents vi
List of Tables x
List of Figures xi
List of Abbreviations xii
Appendices xiii
CHAPTER ONE: INTRODUCTION
Background to the Study 1
- Statement of the Problem 7
- Objective of the Study 8
- Level of adoption of IFRS by the Nigerian Deposit Money Banks 8
- Challenges of the adoption of IFRS 8
- Research Questions 9
- Hypotheses 9
- Rationale forHypotheses 9
- Significance of the Study 11
1.9.1 Significant Implication for investors 11
1.9.2 Significant Implication for Companies’ Management 11
1.9.3 Significant Implication for Academics 11
1.9.4 Significant Implication for Consultants in Practice 12
1.9.5 Significant Implication for Policy Makers 12
- Scope of the Study 12
- Operationalization of Variables 12
- Operational Definition of Terms 13
CHAPTER TWO: REVIEW OF LITERATURE
2.1 Conceptual Review 16
2.1.1 Concept of Financial Performance (Profitability) 17
2.1.2 Concept of Leverage 17
2.1.3 Concept of Liquidity 18
2.1.4 Concept of Fixed Interest Cover 18
2.1.5 Empirical Review 19
2.1.6 The IASC/IASB Conceptual Model 23
2.1.7 IASC/IASB Regulatory Framework 24
2.1.8 Main Characteristics of IFRS 26
2.1.9 Differences in Accounting Standards 28
2.1.10 History of National Differences 29
2.1.11 Differences in Accounting System 33
2.1.12 IFRS Adoption and Developing Countries 34
2.1.13 Objectives of Financial Reporting by Business Enterprises 35
2.1.14 Qualitative Characteristics of Accounting Information 36
2.1.15 Accounting Standards and IFRS in Nigeria 38
2.1.16 Fundamental differences between IFRS and Nigerian GAAP 40
2.1.17 Regulatory Framework and Accounting Standards in the
Nigerian Banking Sector 42
2.1.18 First Time Application of IFRS and Nigerian Banking Sector 45
2.1.19 Financial Statements and Financial Reporting 47
2.1.20 Tools of Analysis and Interpretation of Financial Statements 49
2.2 Theoretical Review 52
2.2.1 Diffusion of Innovation Theory 52
2.2.2 Social Comparison Theory 53
2.2.3 Agency Theory 54
2.2.4 Shareholders’ Theory 56
2.2.5 Stakeholders’ Theory 57
2.2.6 Theoretical Framework 59
2.2.7 Diffusion of Innovation Theory 59
2.2.8 Social Comparison Theory 59
2.3 Empirical Framework of IFRS’s Adoption on Reporting Performance
of Nigerian Deposit Money Banks 60
2.3.1 IFRS adoption and banks reported return on equity 60
2.3.2 IFRS adoption and reported current ratio (Liquidity Ratio) 62
2.3.3 IFRS adoption and banks’ reported Leverage Ratio 63
2.3.4 IFRS adoption and banks’ Fixed Charge Coverage 65
2.4 Summary 65
2.5 Gaps in Literature 66
CHAPTER THREE: METHODOLOGY
3.1 Research Design 68
3.2 Population 68
3.3 Sample size and sampling Technique 69
3.4 Sources of Data 70
3.5 Validity and Reliability of Research Instruments 71
3.6 Method of Data Analysis 72
3.7 Model Specifications 72
3.8 Model Evaluation Technique 73
3.9 Justification for Data Analysis 74
3.10 Apriori Expectation 75
3.11 Ethical Consideration 75
CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION OF FINDINGS
4.1 Descriptive Analysis 76
4.2 Empirical Analysis 79
4.2.1 Test for Equality of Means 79
4.2.2 Correlation Analysis 80
4.2.3 Test of Hypotheses 81
4.2.3.1 Test of Hypothesis One (Ho1) 81
4.2.3.2 Test of Hypothesis Two (Ho2) 83
4.2.3.3 Test of Hypothesis Three (Ho3) 84
4.2.3.4 Test of Hypothesis Four (Ho4) 86
4.3 Discussion of Findings 87
CHAPTER FIVE:SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 91
5.1.1 Summary of Findings 92
5.1.2 Implications of the Findings 93
5.2 Conclusion 94
5.3 Recommendations 94
5.4 Contribution to Knowledge 95
5.5 Limitation of the Study 96
5.6 Suggestion for Further Studies 97
References 98
Appendix 112
INTRODUCTION
The globalization of business had necessitated the introduction of International Financial Reporting Standard (IFRS) in order to present a globally accepted and high quality financial statements which will provide reasonably accurate information about a company’s financial performance to investors and other interested parties that will enable them take investment, credit and similar resource allocation decisions across the globe. (Blanchette, et al, 2011).
With the advent of globalization the have witnessed rapid expansion, diversification and integration. This has brought about a shift away from local financial reporting standards to global standards.
Hence, it is in recognition of the need to have quality financial reports that the adoption of International Financial Reporting Standard (IFRS) is becoming the vogue among countries. (Omowuyi & Ahmed, 2011).
The goal of financial reporting is to make information available for decision making. Diversity in in different countries arises because of the difference in legal and tax systems and business structures.
The International Financial Reporting Standard is intended to harmonize this diversity by making information more comparable and easier for analysis, promoting efficient allocation of resources and reduction in capital cost. (Ajibade, 2011).
Various nations have been using their own Generally Accepted Accounting Principles (GAAP) and the basic accounting concepts to prepare their financial reports. However, over the years, many and several financial reports have come with discrepancies and differences that render such reports incomparable across nations. Secondly, reconciliation of these reports may not really be possible and thus it becomes difficult to use them to make financial decision across nations.
tion of IFRS in Nigeria was unveiled by Honourable Minister of Commerce and Industry on 2nd September, 2010. The roadmap has a three-pronged approach as follows.
REFERENCES
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StudentsandScholarship Team.