ABSTRACT
The study examines the influence of accounting
standard on financial reporting in the Nigeria banking sector, using a sampling
size of 14 banks out of all banks quoted in the Nigerian stock exchange as at
third quarter of 2012. The survey design was adopted in this study and a total
number of 50 questionnaires were administered but 47 copies were returned
completely. The t-statistics was adopted in carrying out the analysis of data.
From the analysis of data collected, the result reveals that there is a positive
relationship between accounting standards, its contents and presentation of
financial statement in the banking sector. Based on these findings, some
recommendations among others were made that proper accounting standards be put
in place by the relevant accounting standard setting bodies so as to ensure the
preparation of high quality financial report or statement in the Nigerian
banking sector.
TABLE OF
CONTENTS
Title
Page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract vi
Table
of Contents vii
Chapter One: Introduction 1
1.1 Background to the Study 1
1.2 Statement of Problem 5
1.3 Research Questions 6
1.4 Objectives of the Study 6
1.5 Statement of Hypothesis 6
1.6 Significance of the Study 7
1.7 Scope of the Study 7
1.8 Limitations of the Study 8
Chapter
Two: Review of Related
Literature 9
2.1 Introduction 9
2.2 The Financial Reporting Council of Nigeria (FRCN) 9
2.2.1Objectives of FRCN 10
2.2.2The power of FRCN 11
2.2.3The Functions of FRCN 12
2.2.4Appointment of the Chairman of FRCN Board 13
2.2.5Powers of the Council 16
2.3 The International Accounting Standard Committee 19
2.3.1 Why are International Accounting
Standard necessary in
Nigeria 24
2.4 International Financial Reporting Standard 26
2.4.1 Benefits of Adoption of IFRS 28
2.4.2 Challenges to the Adoption of IFRS 29
2.4.3 Emerging Countries Challenges 30
2.5 The Role of the users of Financial Statements
in the Development Standards 31
2.6 Financial Reporting: Meaning of Financial Reporting 32
2.7 Objectives of Financial Reporting 32
2.8 Qualitative Characteristics of Reporting 33
2.9 Balance between Different Characteristics 36
2.10 A True and Fair View of Representation 37
2.11 The Element of Financial Statement 37
2.12 Role of Auditors under the new FRCN
Act Registration 38
2.12.1 Standards 39
2.12.2 Ethics 40
2.12.3 Practical
Review 41
2.12.4 Fees
and Penalties 42
2.12.5 Impact
on Client Relationships 42
2.12.6 Information
System 43
2.12.7 General
Issues 44
2.12.8 Benefits
of Auditors 45
2.13 Users of Accounting Information and their
Information Needs 46
2.14 Tax Implication of IFRS in Nigeria 49
Chapter Three: Research Method and Design 51
3.1 Introduction 51
3.2 Research Design 51
3.3 Description of Population of the Study 52
3.4 Sample Size 52
3.5 Sampling Technique 52
3.6 Sources of Data Collection 53
3.7 Method of Data Presentation 53
3.8 Method of Data Analysis 54
Chapter
Four: Data Presentation,
Analysis
and Interpretation 55
4.1 Introduction 55
4.2 Data Presentation 55
4.3 Data Analysis 57
4.4 Hypothesis Testing 68
Chapter
Five: Summary of Findings,
Conclusion
and Recommendations 70
5.1 Introduction 70
5.2 Summary of Findings 70
5.3 Conclusion 72
5.4 Recommendations 72
References 74
Appendix 76
Questionnaires 79
CHAPTER
ONE
INTRODUCTION
1.1
Background to the Study
Section 33 5(1) of the companies and allied
matters act CAMA 1990 as amended stipulates that the preparation of financial
statement, shall comply with the accounting standards’ issued from time to time
by the Nigeria Accounting Standard Board.
Financial statements are described as
the end product of accounting transactions or economic events aimed at
providing qualitative and quantitative financial information to evaluate and
predict the performance of an organization to permit informed judgment and
decision making, (Illaboya,2005, p.167).
In Nigeria, the; standard setting body
was the Nigeria Accounting Standard Board (NASB) which is presently referred to
as the Financial Reporting Council of Nigeria (FRCN) which was passed into law
On 18 May 2011 and was signed into law on 20 July 2011. The financial reporting
council of Nigeria
like all standard setting bodies in the world is independent of the profession
of accounting. The council identifies areas where a measure of uniformity is
required so as to bridge the variation in reporting practices and ensure a high
level of uniformity which is panacea to corporate compatibility,
(Illaboya,2005, p.169).
The need for an accounting standard
setting body in Nigeria
became urgent when the Nigeria
enterprise promotion decree was promulgated to transfer ownership of companies
to Nigerians. Foreigners exploited the lack of uniform accounting procedures in
valuing their equities in companies affected by the decree. Those companies, whose
parents were resident outside Nigeria,
followed the dictate of their parents. At the end of it all, there were as many
accounting practices reflected in the account as there were companies in Nigeria,
(Nnadi, 2007, p.32).
Whenever an auditor challenged a company
on the appropriateness of its accounting practices, management was usually
quick to as the auditor to produce the law prohibiting such practice. The
Nigeria accounting standard board presently known as the financial reporting
council of Nigeria was therefore ‘established in order to ensure that these
conditions did not persist, (Nnadi, 2007, p.38).
The Nigeria Accounting Standard Board (NASB)
presently referred to as Financial Reporting Council of Nigeria (FRCN) has been
the body responsible for establishing standards of accounting and reporting in
the Nigeria business enterprises. The board help to ensure that the published
financial statements are uniform in content and format and communicate
precisely what they purport to convey. These standards are in effect rules
governing the preparation of financial statements. Accounting standards issued
by the board are essential because they lead to efficient allocation of
resources in the economy such that more successful companies are better able to
raise capital to finance their operations than the less successful one, (Nnadi,
2007, p.45).
The development of new accounting
standards involves a long process usually referred to as “due process”. The due
process ensures that all interested parties get the chance to make some
contributions towards the proposed standards. The process begins with the
selection of an area of accounting to be standardized. An accounting problem
must be sufficiently significant in terms of its effect on the financial statements.
If problems do not create significant difficulties, the cost of the due process
may be justifiable. Any individual or organization can write to the financial
reporting council (F1C) to suggest an issue for standardization, (Nnadi, 2007,
p.45).
Accounting standard is a statement
issued by the appropriate standard setting body locally or internationally on a
specific area or topic in financial accounting, the acceptance and application
of which is mandatory for prepares and users of financial statement, (lgben,2004,p.41).
Accounting standards are issued at the
international level by the International Accounting Standard Committee (IASC)
while they are issued in Nigeria
by the financial reporting council of Nigeria. The standards issued by
the (IASB) are known as international accounting standard (IAS) while those
issued by the (FRCN) are known as statement of accounting standard presently
know as International Financial Reporting Standard (IFRS). Both IAS/IFRS are applicable
except that: if an IAS is inconsistent with an SAS, the IAS/IFRS would be
inapplicable to the extent of the inconsistency. This implies that on any
matter on which an IAS and an SAS make conflicting pronouncements, the SAS
shall, supersede the IAS in Nigeria, (Igben, 2004, p.4l).
1.2
Statement of Problem
Our national accounting standard (SAS)
are partly based old IAS, some of which have since been amended or withdrawn by
IASB. Furthermore, the local standards do not cover all the aspects of
financial reporting encountered by prepare of financial statements. We think it
is fair to admit that our standards are partly out of date and are not
sufficiently comprehensive to form a basis for the preparation of high quality
financial statements.
1.3
Research Question
Is there a positive relationship between
accounting standards, its contents and the presentation of financial statement?
1.4
Objective of the Study
To find out if there is a positive
relationship between accounting standard and the content in the presentation of
financial statements.
1.5
Statement of Hypothesis
Ho: There is no
positive relationship between accounting standard and the content and presentation of financial statements.
HI:
There is a positive relationship
between accounting standard and the content and presentation of financial
statements.
1.6
Significance of the Study
This study will be relevant to users of financial
statement. Examples are investors, shareholders, employees, government etc.
Every business organization uses financial statement to communicate information
about its performance, resources and obligation and interested parties. The
report, are prepared in such away to meet different needs of the parties. It is
expected that at the end of the research work solutions would be provided to
the problems and recommendations on the content and presentation of financial
statement and the influence of standards on financial statement in the Nigeria
banking sector.
1.7
Scope of the Study
The fact is that this study attempts to
access and eva1uate the influence of accounting standards on financial
statements in the Nigeria banking sector. The study covers the statement of
accounting standard (SAS), the Nigeria
accounting standard board (NASB) now referred to as Financial reporting council
of Nigeria (FRCN), the relevant international accounting standard board (IASB)
and the international financial reporting standard (IFRS).
The study shall be focused on 14 banks
in Nigeria and shall be concentrated in Benin City, Edo State.
1.8
Limitations of the Study
The scope of the study would have been
more enlarged in terms of looking at more banks but the inability to go round
the banks in Nigeria has
limited the researcher to just 14 banks all in Benin City,
Edo State. Data were extracted from
published information obtained from books, financial statements, seminar papers
and the internet.
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