Project Abstract

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>