IMPACT OF ADOPTION OF IFRS ON QUALITY OF FINANCIAL REPORTING OF FIRMS IN NIGERIA-UBA AS A CASE STUDY

ABSTRACT

This study examined the impact of adoption of IFRSs on the quality of financial statements of firms in Nigeria with UBA as a case study. The Value Relevance Model, Accrual models and Normative theory were the theoretical review that was adopted for the study. Data for this study was derived using interview method as relevant finance persons across the Bank were interviewed. Chi-Square statistics were used to analyse the data. Findings revealed that IFRS adoption had no significant impact on comparability of financial statement of the Bank. Findings also revealed that IFRS adoption had no significant impact on relevance of UBA. Findings further revealed that IFRS adoption had no significant impact on clarity and quality of financial reporting of UBA.  It was concluded that adoption of IFRS benefited UBA in various ways. However, it did not result in improved quality of financial reporting of the Bank due to systemic factors common to Nigerian companies. It is recommended that being honest and truthful in preparing financial reports will improve quality of reporting of Nigerian firms and also effective communication will lead to improved consumers' comprehension of financial information, which will result in more clarity..

1.0 Introduction

            It is pertinent for users who are involved in banks' financial reporting, such as bankers, accountants, auditors, corporate management, investors, lenders, financial analysts, and regulators, must comprehend the potential effects of IFRS on banks' accounting procedures. But accounting has often been referred to as the language of business (Alawiye-Adams&Ibukun-Falayi, 2018). This is due to the fact that accounting focuses on locating, categorizing, summarizing, and analyzing economic and other pertinent information concerning reporting organizations so that intended consumers of such data can draw valid conclusions. Financial statements are used to inform stakeholders of all types and levels about the general health and condition of affairs of organizations (Key & Kim, 2020).

            The International Accounting Standard Board (IASB) created the International Financial Reporting Standards (IFRSs) as a set of accounting standards for the production and presenting of public financial statements. Financial reporting based on IFRS has as its main goal the provision of high-quality financial reporting data regarding economic entities that are essentially financial in nature, helpful for financial choice-making (IFRS, 2022.) More than 120 nations adopt the International Financial Reporting rules (IFRSs), a set of accounting rules that were created via a thorough due diligence process. These nations include Australia, Brazil, Canada, the European Union, South Africa, Nigeria, and many others (Alawiye-Adams&Ibukun-Falayi, 2018).

According to accounting theory, financial reporting's primary goal is to lessen the knowledge gap between business executives and their connected parties (Waweru& Ntui, 2018). Financial reporting does this by providing pertinent and timely information (Hoa et al., 2019). It is crucial to supply high-quality financial reporting information due to the fact that it will have a favorable impact on how capital providers and other stakeholders allocate resources for investments, loans, and other uses, ultimately improving market efficiency (IFRS Foundation, 2022).

The banking industry in Nigeria is one of the cornerstones of economic development since it serves as an intermediary between the surplus and deficit sectors of the economy, fostering expenditures, growth in their economies, and development(Umoren & Enang, 2015). The effectiveness of the nation will improve as investment in the banking industry rises, but for there to be any real investment in the banking sector, accurate accounting data about the performance of the banks is crucial. Differentiated stakeholders who want to analyze the risk and value of a company before making decisions based on those factors rely on the information provided by the leadership team the financial statements (Alawiye-Adams&Ibukun-Falayi, 2018). The usefulness and relevancy of the information in the accounting record determines how successfully and satisfactorily it may assist users in making decisions(Emmanuel, 2021)

International accounting systems offer an intriguing context for examining the economic effects of financial reporting because there is significant diversity in accounting quality and financial effectiveness across nations. An important challenge for readers of financial statements is the comparison of pre-changeover Nigerian Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standard (IFRS) and the identification of variations between the two regimes (Rabiu, 2019). In contrast to accounting records prepared using a different set of national accounting standards, modifications to IFRS will result in greater comparability among countries, an increase in the growth of countries' international businesses, assistance for domestic investors to invest, which will result in more capital flows to the country, and investor have a greater understanding about the investment opportunities. IFRS also uses a premise-based rather than rules-based philosophy (Alawiye-Adams&Ibukun-Falayi, 2018).

            Stakeholders have questioned the adoption of IFRS in the manufacturing process of financial statements in Nigerian banks despite the benefits of adopting a universally accepted technique around the world, citing the disadvantages and difficulties of doing so in a developing nation like Nigeria. They think it will be challenging for Nigeria to adopt IFRS for the compilation of financial statements because it is a developing nation. This is due to two factors: first, even though most Nigerian banks have implemented IFRS, the comparability quality of their financial reports is still inadequate; and second, the relevance principle is still absent in Nigerian banks. Finally, despite the implementation of IFRS, lack of clarity continues to be a major issue for Nigerian banks.

            Nigeria, a developing nation, might not have the resources necessary to address the aforementioned issues, and they don't see the need for IFRS as they use Generally Accepted Accounting Principles (GAAP) to prepare their accounting records. As a result, this study was started to look at the effects of IFRS adoption on the financial statements in Nigerian banks with a focus on UBA.

 Research Hypotheses

            The following were hypothesized in this study;

H1:IFRS adoption have no significantly impact on comparability objective of Nigerian banks.

H2: IFRS adoption have no significantly impact on relevance principle of Nigerian banks.

H3: IFRS adoption have no significantly impact on clarity quality requirements of Nigerian bank.