Impact of international financial reporting standards ifrs on the quality of financial statements (a case study of first bank of nigeria plc)

Project Abstract

This research project aims to investigate the impact of International Financial Reporting Standards (IFRS) on the quality of financial statements, focusing on a case study of First Bank of Nigeria Plc. The adoption of IFRS by Nigerian banks has brought about significant changes in the financial reporting landscape. This study seeks to analyze how the implementation of IFRS has influenced the quality of financial reporting at First Bank of Nigeria Plc. The research will employ a mixed-methods approach, combining both quantitative and qualitative methods to gather data. Financial statement analysis will be used to assess the quality of financial reporting before and after the adoption of IFRS at First Bank of Nigeria Plc. In addition, interviews with key stakeholders within the organization will provide insights into their perceptions of the impact of IFRS on financial reporting quality. The findings of this study are expected to contribute to the existing literature on the impact of IFRS on financial reporting quality in the banking sector, particularly in the context of a developing economy like Nigeria. By focusing on a specific case study, this research will provide a deep understanding of the challenges and benefits associated with the adoption of IFRS at First Bank of Nigeria Plc. Overall, this research project will shed light on the extent to which IFRS has influenced the quality of financial statements at First Bank of Nigeria Plc and provide valuable insights for regulators, standard-setters, and practitioners in the field of financial reporting. Understanding the impact of IFRS on financial reporting quality is crucial for ensuring transparency, comparability, and reliability of financial information, which are essential for making informed decisions in the financial markets.

Project Overview

<p> <b></b></p><p><b><b>INTRODUCTION</b></b></p><p><b><b></b></b></p><b><b><p><b>1.1 &nbsp; Background of the Study</b></p><p>Globalization<br>of capital markets requires a unified global accounting, reporting and<br>disclosure set of standards. As a result of increasing volume of cross border<br>capital flows and the growing number of foreign direct investments via mergers<br>and acquisitions in the globalization era, the need for the harmonization of<br>different practices in accounting and the acceptance of worldwide standards has<br>arisen. This worldwide standard is International financial reporting standards<br>(IFRS). Although, there has been series of contentions as regarding the impact<br>of this standard on the quality of financial statements, but this study will<br>provide a clear understanding of their relationship.</p><p>International<br>Financial Reporting Standards (IFRS) is a set of principle –based issued and<br>established by International Accounting Standards Board (IASB) and generally<br>accepted by different countries around the world to ensure comparability and<br>transparency in accounting practice (Desoky and Mousa, 2014).The establishment<br>of such standards by IASB aimed at achieving harmonization and promotion of<br>financial practices to ensure consistency in reporting format across countries<br>which should minimize cost of processing financial information to investors and<br>improving efficiency of capital markets (Wen et al, 2011). Recently around the<br>world more than 120 countries and reporting jurisdictions required domestic<br>listed companies to prepare their financial statements in accordance with IFRS<br>(Mousa and Desoky, 2014). The adoption and implementation of IFRS has been one<br>of the most important events in accounting history of different countries<br>around the world which induce significant changes in the financial practices<br>(Kousenidis, et al, 2010). However, changes are found to vary among countries<br>and reported to be more serious in countries that had a code-law accounting<br>system (Ball et al., 2000). Before implementation of IFRS, existed accounting<br>system affected by severe government and legalistic influences which is in<br>contrast with a common-law accounting system countries like North America<br>(Kousenidis, et al, 2010). In a common law accounting system there is a proper<br>description of IFRS and accounting is mainly affected by the market<br>practitioners (Ball et al., 2000). With growing acceptance of IFRS by different<br>countries around the world, many researchers aimed to find out empirically<br>whether the new accounting standards has improved the quality of financial<br>statements that is reported to the users.</p><p>Furthermore,<br>banks constitute one of the pillars of economic development. It intermediates<br>funds between the surplus and the deficit economic units, thus stimulating and<br>promoting investments, economic growth and development. It follows that<br>increase in investment in the banking sector will lead to improved performance<br>of the economy. However, for any meaningful investment to occur in the banking<br>sector, quality financial information regarding share price and other<br>performance indicators are essential. Investors, who are usually different from<br>the management of the investments, only rely on the information supplied by<br>management in the financial statements, in assessing the risk and value of a<br>firm before deciding either to invest or to disinvest. The ability of the<br>financial statement to effectively and satisfactorily guide investors on their<br>investment decisions depends on the quality of such financial statements.</p><p>According<br>to Vishnani and Shah (2008), quality of financial statements implies the ability<br>of the financial information contained in the financial statements to explain<br>the stock market measures. The quality variable implies that data or amounts in<br>the financial statement are very correct and can form a useful guide for investors<br>in their pricing of shares. Investment decision, therefore, centres on the<br>association between stock returns or share price and accounting related<br>information such as earnings, cash flows, book quality of equity, firm’s size,<br>etc.</p><p><b>1.2 &nbsp; Statement of the Problem</b></p><p><b></b></p><b><p>Considering<br>the critical importance of banks to strategic economic development plans in<br>Nigeria, because this accounts for about 31% of the total market<br>capitalization, according to NSE (2014), and the truth that banking sector was<br>the first among the listed public entities in Nigeria to fully accept IFRS, a<br>study on the impact of IFRS on the quality of financial statements of a major<br>bank in Nigeria (First bank Plc) becomes important in order to ascertain the<br>effects of the mandatory acceptance of IFRS on the quality of financial<br>information of banks in Nigeria. Besides, a set of financial statements are<br>meant for diverse users; ranging from management, owners, creditors, respondents,<br>government agencies, regulatory authorities, investors, analysts, etc.<br>Particularly, investors wish to know which items in the financial information<br>are useful for investment decisions. Based on the need for the provision of<br>feedback on whether the change to IFRS has improved accounting quality, this<br>study will examine the impact of IFRS on the quality of financial statements in<br>First Bank Nig. Plc.</p><p><b>1.3 &nbsp; Objectives of the Study</b></p><p><b></b></p><b><p>The<br>following are the objectives of this study:</p><p>1) To<br>examine the impact of International Financial Reporting Standards IFRS o the<br>quality of financial statements of First Bank Plc Nigeria.</p><p>2) To<br>examine the benefits ofInternational Financial Reporting Standards IFRS in<br>First Bank Plc Nig.</p><p>3) To<br>analyze the relationship between International Financial Reporting Standards<br>IFRS and the quality of financial statements of First Bank Plc Nigeria.</p><p><b>1.4 &nbsp; Research Questions</b></p><p><b></b></p><b><p>1. What<br>is the impact of International Financial Reporting Standards IFRS o the quality<br>of financial statements of First Bank Plc Nigeria?</p><p>2. What<br>are the benefits of International Financial Reporting Standards IFRS in First<br>Bank Plc Nig?</p><p>3. What<br>is the relationship between International Financial Reporting Standards IFRS<br>and the quality of financial statements of First Bank Plc Nigeria?</p><p><b>1.5 &nbsp; Hypothesis of the Study</b></p><p><b></b></p><b><p>HO:<br>There is no significant relationship between International Financial Reporting<br>Standards IFRS and the quality of financial statements of first bank Plcin<br>Nigeria</p><p><b>1.6 &nbsp; Significance of the study</b></p><p><b></b></p><b><p>The<br>following provided a functional significance for this study:</p><p>1) The<br>findings from this study will be very useful for business managers particularly<br>banks in the understanding of the relationship between international financial<br>reporting standards IFRS and the quality of financial statements of bank in<br>Nigeria.</p><p>2) This<br>research will be a contribution to the body of literature in the area of<br>international financial reporting standards IFRS and the quality of financial statements<br>in Nigeria banks, thereby constituting the empirical literature for future<br>research in the subject area.</p><p><b>1.7 &nbsp; Scope and Limitation of the Study</b></p><p><b></b></p><b><p>This<br>study is limited to First Banks Plc in Nigeria. It will also cover the<br>relationship between international financial reporting standards IFRS and the<br>quality of financial statements in First Bank Plc in Nigeria.</p><p><b>Definition of Terms</b></p><p><b></b></p><b><p>Financial<br>statements: A financial information (or financial report) is a formal record of<br>the financial activities and position of a business, person, or other entity.<br>Relevant financial information is presented in a structured manner and in a<br>form easy to understand.</p><p>Quality:<br>the standard of something as measured against other things of a similar kind;<br>the degree of excellence of something.</p><p>Standards:<br>an idea or thing used as a measure, norm, or model in comparative evaluations</p><p>Investment:<br>the action or process of investing money for profit or material result</p><p><b>References</b></p><p>Ball,<br>R., &amp; Brown, P. (1968).An empirical evaluation of accounting income<br>numbers. Journal of Accounting Research, 6(2), 159-178.</p><p>Desoky,<br>A.M., and Mousa, G.A. (2014).The value relevance and predictability of IFRS<br>accounting information: The case of GCC stock markets. International Journal of<br>Accounting and Financial Reporting,4 (2)</p><p>Kousenidis,<br>D., Ladas, A. and Negakis, C. (2010).Value relevance of accounting Information<br>in the preand post-IFRS accounting periods. European Research Studies,VIII (1)</p><p>NSE<br>(2014).Market Capitalization. [Online] Available: <a target="_blank" rel="nofollow" href="http://www.nse.com.ng/Pages/default.aspx?c=MARKCAP">http://www.nse.com.ng/Pages/default.aspx?c=MARKCAP</a>.</p><p>Vishnani<br>S., and Shah B. K.,2008, Value relevance of published financial statements-<br>With special Emphasis on Impact of cash flow reporting”, International Research<br>Journal of Finance and Economics, 17, 84-90.</p><p>Wen<br>Q, Fong,M and Oliver,J.(2012). Does IFRS convergence improve quality of<br>accounting information?. – Evidence from the Chinese stock market. Corporate<br>Ownership &amp; Control,9(4).</p></b></b></b></b></b></b></b></b></b> <br><p></p>