Abstract
This research examines the effect of accounting standards on the quality of
financial reporting in Nigeria. The broad objective of the study is to
determine the effect of financial accounting standard on the quality of
financial reporting in Nigeria and also to ascertain if accounting standard is
effective in business enterprise. It also aims at bringing to the awareness of
the users of financial statement the benefits of financial reporting standard
towards improving business performance. The
researcher adopted the primary source of data collection and the chi-square
statistical tool was used to test the stated hypotheses. It was found that
financial reporting standard has a significant effect on financial reporting in
Nigeria and that accounting reporting standard is effective in business
enterprise. Finally, it was recommended that the standards setting body
maintain cooperation with government regulatory bodies and financial
institution so as to ensure compliance and disclosure in all material respect
with financial reporting standard requirement. The financial reporting standard
(FRS) should ensure full compliance.
TABLE OF CONTENTS
Cover
Page i
Title
Page ii
Approval
Page iii
Certification
iv
Dedication
v
Acknowledgements
vi
Abstract
viii
Table
of Contents ix
Chapter One: Introduction 1
1.1
Background to the Study 1
1.2
Statement of Problems 3
1.3
Research Questions 4
1.4
Objectives of the Study 4
1.5
Statement of Hypotheses 5
1.6
Significance of the Study 5
1.7
Scope of the Study 6
1.8
Limitations of the Study 7
1.9
Definition of Terms 7
Chapter
Two: Review of Related
Literature 10
2.1
Introduction 10
2.2
Concept of Financial Statements 12
2.3
Concept of Financial Accounting 14
2.4
Concept of Accounting Standard 16
2.5
Importance of Accounting Standard 18
2.6
International
Financial Reporting Standards (IFRS) 20
2.7
Features of IFRS 21
2.8
The Nature and Scope of Financial
Reporting 24
2.9
Approaches to Theories of Financial
Reports 28
2.10
Qualities of Financial Reporting 29
2.11
Factors
Associated With Reporting Quality Assessment 30
2.12 Objectives of Financial Statement and
Reporting 31
2.13 Disclosure in Corporate Financial Reporting 32
2.14 The Effects of Accounting Standards on Financial Reporting Quality 34
Chapter
Three: Research Method and Design 39
3.1
Introduction 39
3.2
Research Design 39
3.3
Description of Population of the Study 39
3.4
Sample and Sampling Techniques 40
3.5
Instrumentation 40
3.6
Method of Data Presentation 41
3.7
Method of Data Analysis 41
Chapter
Four: Data Presentation, Analysis and Hypothesis Testing 43
4.1 Introduction 43
4.2 Data Presentation 43
4.3 Data Analysis 43
4.3 Hypothesis Testing 54
Chapter Five: Summary
of Findings, Conclusion and Recommendations 59
5.1 Introduction 59
5.2 Summary of Findings 59
5.3 Conclusion 59
5.4 Recommendations 60
References 62
Appendices 64
Appendices 77
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The end product of financial reporting
is the preparation and publication of financial statement. A substantial number
of alternative postulate, principle assumption and method adopted by a
reporting entity in the preparation of financial statement can significantly
affect its result of operation and understanding the interpretation of
financial reporting in financial statement.
The financial statement prepared by the
accountants is based on convention that is derived from printable reports and
there conventions originate from such concepts as: entity, going concern,
periodicity, realization consistency, matching concept, historical cost. These
concepts are fundamental to financial reporting standards and presentation of
financial statement, disclosure of fundamental financial concept and acts
followed.
This is because financial statement are
for interest to a variety of users, especially shareholders, the use of
financial statement clearly valuable evaluation of a reporting enterprise
unless if financial statement clearly disclose the significant financial
accounting policies that have been adopted in their preparation.
Its is also adopted in recognizing
measures and values on item of revenue, expense, gain, loss or any asst or
liability. Financial reporting practice have evolved in response to the verity
and complexity of types of enterprise and business transaction, there exist
more than one recognized calculating profit, measuring depreciation, valuing
inventory.
Standard accounting practices
require publicly traded companies
to follow certain accounting rules when presenting financial statements so that
the readers of the statements can easily compare different companies. Private
companies are also often required by banks and shareholders, for example, to
present information according to their specified rules.
Usually,
countries practicing civil law system write
standards into law and countries with English
common law systems have private
organizations to set the rules. There are specialist organizations that can
arrange for the set-up of an accounting practice with a franchise business
model which can prove successful from the out-set.
The accounting standards are developed
to ensure a high degree of standardization in the published financial
statement. They provide the necessary information about how financial reporting
information should be gathered, prepared and presented in order to improve the
value of its contents and facilitate through understanding.
1.2 Statement of Problem
Financial accounting as an aspect of the
accounting profession is concerned primarily with the Tran writing of financial
information to the user who would use it to improve the outcome of their
decision process. The financial information are embodied in the financial
statement which serves as a means of communicating information to interested
parties the obligation and performance of the reporting entity or enterprise in
Nigeria system.
In preparing and presenting financial
statements, the accountants must be guided in such preparation by the standard
of the profession to ensure that such financial statement prepared and
presented will facilitate a thorough understanding to its user.
1.3 Research Questions
The following research questions are
used in the research work.
i. What
significant effect does financial accounting standard has on the quality of
financial reporting in Nigeria?
ii. How effective is accounting standard in
business enterprise?
iii. What
are the problems encountered in the application of accounting standard?
1.4 Objectives of the Study
The broad objective of this study is to
ascertain the effect of accounting standard on the quality of financial
reporting in Nigeria. To following are the sub-objectives;
1. To
determine the effect of financial accounting standard on the quality of
financial reporting in Nigeria.
2. To ascertain if accounting standard is
effective in business enterprise.
3. To
ascertain the problems encountered in the application of accounting standard.
1.5 Statement of Hypotheses
The following are the hypotheses of the
study;
Hypothesis I
HO: Financial accounting standard
has no significant effect on the quality of financial reporting in Nigeria.
HI: Financial accounting standard
has significant effect on the quality of financial reporting in Nigeria.
Hypothesis
II
HO: Accounting reporting standard is ineffective
in business enterprise.
HI: Accounting reporting standard is effective
in business enterprise.
Hypothesis
III
HO: There are no problems
encountered in the application of accounting standard.
HI: There are problems
encountered in the application of accounting standard.
1.6 Significance of the Study
At the end of this research work, one
will be able to know the procedures adopted in the preparation of financial
statement reporting and the information contained therein.
Accounting Users:
The relevance of the various concepts and convention in the preparation of
financial will be classified. This is based on the fact that an attempt will be
made to discover the importance of disclosure of the various concept and
convention used in the preparation of financial statement, the understanding
and interpretation of which it will greatly affect the decision of users.
Future Researchers: the
study will broaden the knowledge of the academic community on the importance of
accounting standard on the quality of financial statement and their subsequent
disclosures.
1.7 Scope of the Study
The scope of this research work is
limited to the effect of accounting standards on the quality reporting in
Nigeria. In this study, the research covers in depth information gathered in
such areas as, the historical development of financial statement, the objective
of financial reporting, the various financial reporting standard, postulate the
theoretical concept and principles. The time frame of the study is 5 years i.e.
2011 – 2015 (both years inclusive).
1.8 Limitations of the Study
In carrying out this research work, a
number of difficulties were encountered.
1. Finance:
lack
of adequate and sufficient finance in terms of the cost of collecting data, and
processing the required information hindered the smooth conduct of this
project.
2. The
non-availability of existing research materials made the researcher to search
deeply for relevant data information from the internet, library and book
stories.
3. In
the course of personal interview conducted by the researcher, it was difficult
to obtain some information, as they were deemed confidential by the companies
and persons visited.
1.9 Operational Definition of Terms
For the purpose of clarity, some of the
terms in the research work as derived by IAS are explained below.
Financial
Statement: This is a formal record of the financial
activities of a business, person or other entity. The objective of financial statements is to provide
information about the financial position, performance and changes in financial
position of an enterprise that is useful to a wide range of users in making
economic decisions.
Financial Policies: These
are those bases or principles describing a corporation choices regarding its
debt/equity mix, currencies of denomination, maturity structure and hedging of
decision with a goal of maximizing the value of the firm to some set of
stockholders.
Financial Information: These
are data such as credit cards numbers, credit ratings, accounting balances and
other monetary facts about a person or organization that are used in billing,
credit assessment loan transactions and other financial activities.
Financial Reporting
Standards: This is a set of accounting standards stating how
particular types of transactions and other event should be reported in the
financial statement.
Entity:
This means an economic unit that is treated as separate from parties having
proprietary or economic interest.
Investment:
These are asset acquired for the purpose of income generation without any
activities in the form of production, trade or provision of services.
Asset:
This is a research controlled by an entity as a result of past event from which
future economic benefit are expected.
Liability:
A present obligation to transfer economic benefit as a result of past
transaction.
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