– International Financial Reporting Standards Adoption and Earnings Management in Nigerian Non-Financal Quoted Companies –
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ABSTRACT
This study investigated the effects of IFRS adoption on earnings management of non-financial quoted companies in Nigeria. I used a sample of 75 non-financial quoted companies in Nigeria that has consistently published their audited annual financial report between 2010 and 2014.
In analyzing the collected data, I adopted descriptive statistics, correlation analysis and a panel multiple regression data analysis to identify the possible effects of IFRS adoption on general earnings management of Nigerian non-financial quoted companies.
I find that IFRS adoption in Nigeria does not significantly affects the tendency of Nigerian companies to manipulate earnings. I also find that higher audit quality and large firm size does not created a situation where IFRS adoption affects earnings management.
Therefore, it is recommended that roadmap to the convergent with IFRS in Nigeria which required all the significant public interest entities to comply with IFRS starting from 1st December, 2012 should be reviewed and allow certain companies without significant customers or operations outside Nigeria to continue the application of NGAAP.
Since they may not have the capability and a to prepare IFRS financial statements and it has been established that IFRS does not always lead to an improvement in financial reporting quality.
The study further recommended that regulatory authorities such as Security Exchange Commission (SEC) and of Nigeria (FRCN), should device means of encouraging quoted companies in Nigeria to employ the service of Big4 audit firm so as to enhance high audit quality.
The results indicate that high audit quality work as a constraint on earnings manipulation and consequently, reducing the level of earnings management practices.
INTRODUCTION
and accounting get greater momentum since the universal declaration of IFRS. Approximately more than 120 countries have required or permitted the use of IFRS standards by publicly quoted companies (IASB, 2012).
IFRS is a globally-accepted set of accounting Standards and Interpretations established by International Accounting Standards Board (IASB) and International Financial Reporting Interpretation Committee (IFRIC) which was actually created as a common all around the world and it was expected to become the key financial reporting standards for all business entities.
The fundamental objective of IFRS is to develop, in the public interest, a single set of high quality, globally accepted financial accounting standards based upon clearly articulated principles (IASB, 2012).
Prior to the , all companies in Nigeria have been complying with Standards issued by The Nigerian Accounting Standards Board (“NASB”) which has now metamorphosed to Financial Reporting Council of Nigeria (FRCN). The NASB announced its Roadmap to convergence with IFRS in September 2010.
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Armstrong, C., Barth, M. Jagolinzer, A. & Riedl, E., (2007). Market Reaction to the Adoption of IFRS in Europe. Working paper, Standford University.
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