Ifrs Adoption

Topics: International Financial Reporting Standards, Financial statements, Economics Pages: 16 (4780 words) Published: June 19, 2013
Australian Journal of Business and Management Research

Vol.2 No.05 [76-83] | August-2012 ISSN: 1839 - 0846

ADOPTION OF IFRS AND FINANCIAL STATEMENTS EFFECTS: The Perceived Implications on FDI and Nigeria Economy

Kenneth Enoch Okpala Department of Financial Studies. College of Management Sciences Redeemer's University, Mowe. Ogun State. Nigeria. kenenoch@yahoo.ca or okpalak@run.edu.ng

ABSTRACT The IFRS adoption is already an issue of global relevance among various countries of the world due to the quest for uniformity, reliability and comparability of financial statements of companies. This research paper investigated the effect of IFRS adoption on Foreign Direct Investment and Nigeria economy. The population consists of quoted companies in Nigeria Stock Exchange (Preparers) and Investment Analysts (Users). Stratified Random sampling method was adopted and primary data used to elicit responses with 123 structured questionnaires administered. Findings showed that IFRS has been adopted in Nigeria but only fraction of companies has implemented with deadline for the others to comply. It is perceived that IFRS implementation will promote FDI inflows and economic growth. It was recommended that all stakeholders should endeavour to have full implementation to reap benefits of the global GAAP and principle - based standards Key-words: International Financial Reporting Standards, Financial Statements, Foreign Direct Investment, Economy

1.0 INTRODUCTION Financial statements apart from stating the financial position of an organization, provides other information such as the value added, changes in equity if any and cash flows of the enterprise within a defined period time to which it relates (Iyoha and Faboyede, 2011). This information is useful to a wide range of users making informed economic decisions. The quality of financial reporting is indispensable to the need of users who requires them for investment and other decision making purposes. Financial reports can only be regarded as useful if it represents the “economic substance” of an organization in terms of relevance, reliability, comparability and aids interpretation simplicity (Penman, 1984). Ahmed (2003), stated that useful accounting information derived from qualitative financial reports help in efficient allocation of resources by reducing dissemination of information asymmetry and improving pricing of securities (Spiceland et al., 2001). To prepare and audit financial statements, some accounting convention and principles known as standards have been put in place by appropriate bodies set up for the purpose to encourage uniformity and reliability (Stainbank and Peeles, 2006). The implementation of IFRS would reduce information irregularity and strengthens the communication link between all stakeholders (Bushman and Smith, 2001). It also reduces the cost of preparing different version of financial statements where an organization is a multi-national (Healy and Palepu, 2001). Accounting standards ensures that important matters regarding preparation and presentation of financial statements as well as auditing same are not left to whim of the preparers and auditors. Before IFRS adoption era, most countries had their own standards with local bodies responsible for developing and issuance. The Nigerian Accounting Standards Board (NASB) was responsible for developing and issuing standards known as Statements of Accounting Standards (SAS) and in the new dispensation, the body was renamed Financial Reporting Council (FRC) of Nigeria as the regulatory body overseeing the adoption and implementation IFRS. The general objective of this research is to examine the effect of IFRS adoption on FDI and Nigeria economy. The main research questions upon which an attempt is meant to provide answers in the course of the study includes (i) is there any significant relationship between the adoption of IFRS and FDI? (ii) To what extent will IFRS adoption enhanced the uniformity,...

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Australian Journal of Business and Management Research
Vol.2 No.05 [76-83] | August-2012 ISSN: 1839 - 0846
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