The objective of this paper is to evaluate the implications of the adoption of International financial Reporting Standard (IFRS) on corporate governance practices. The paper examines empirical literature with a view to identifying the effects of the adoption of International financial reporting standard on the existing corporate governance. Based on the papers reviewed, it was found that IFRS adopting will positively strengthen the existing corporate governance practices in the Nigeria Banking sector by giving room for transparent reporting of financial information. The implication of the findings is that the mandatory adoption of IFRS as a global financial reporting standard will enhance consistency and comparability of accounting information.

1.1       Background of the study
            Prior to the advent of International financial reporting standard (IFRS) as a has its own standard accounting practice version of the Generally accepted Accounting principle (GAAP).
            In Nigeria the preparation of entity’s financial statement was hitherto based on her Local Statement of Accounting Standard (SAS) issued by the Nigeria Accounting standard Board (NASB). The statement of Accounting Standard which is a blueprint from GAAP usually contain references at the concluding part the standard to the effect that each SASS accord. Substantially with the equivalent International Accounting Standard (Ogbonnaya 2004). This implies that before the adoption of IFRS as a global financial reporting standard, Nigeria’s Local Statement of Accounting standard was prepared based on the International Accounting standard (IAS).
            Despite the foregoing differences exist between the Nigeria statement of Accounting Standard (SAS) and the International Accounting standard (IAS). Olowo-Okere et al., (2004) observe that there is a gap when statements of accounting are compared with their international equivalents. It was concluded that even though Nigeria statements of Accounting standards are based on the international Accounting Standards the accounting statements are outdated and does not meet with the needs of a modern financial system. In the words of Folajimi (2011), the statement of accounting standard does not inspire investors confidence, and hence, present obstacles to the growth and international of Nigeria banking sector.
            In the bid to eliminate the existing differences in financial reporting, the European Union in 2002, chose International financial Reporting Standard (IFRS) as a the common financial reporting language for listed companies from 2005. this radical step was one element of the creation of a single capital market min Europe and promised more comparable financial reporting across Europe and increase transparency, leading to lower cost of capital for companies” (Jeka 2011).
            Also, on September 18, 2002, the financial Accounting standard Board (FASB) in the United States, and the International Accounting standard Board (IASB) met in Norwalk with a view to creating a single set of universal accounting standard. The Board has been studying the differences and offering solutions with a view to reducing the inconsistencies in order to create a single set of high quality standard that would be suitable for global businesses (http://www.american
            In Nigeria the story is not different, Nigeria has made road map on how to effectively adopt International financial Reporting Standard (IFRS) as a universal financial reporting standard. The adoption of International Financial Reporting Standard (IFRS) is expected to take place in three phases beginning with publicity listed entitles and significant public interest entities in January 1, 2012. Other public interest entities, in January 1, 2013 and small and medium-sized entities (SMES) by January 2014. (Martins-Kuye 2010).
            However, with the establishment of financial Reporting council of Nigeria. (FRCN) in 2011, the council would take over and improve upon the functions of the former Nigerian accounting Standard Board (NASB) in order to make Nigeria to meet internationally accepted standard and codes of corporate financial reporting undoubtedly, the establishment of the financial reporting council of Nigeria has indicated to a large extent that Nigeria is fully prepared to be part of the global change in financial reporting standard.

1.2       Statement of Problem
            Recently, the central Bank of Nigeria rescued eight commercial Banks after the consolidation exercise. The consolidation of banks in Nigeria contributed to restore the confidence of the investing public in the banking Industry. Unfortunately, the cases of the now revitalized spring bank PLC and Wema Bank PLC are well known. Both Banks were victims of poor corporate Government Standard, (Awoyemi Olufemi 2009).
            In the same veins some of the rescued Banks hide multibillion naira Losses in differed taxes (Business Day 2011). This is done to deceive investors and the general public who accept accounting  Information as contained in the entity’s financial statements as the ultimate truth. In indeed the present accounting systems of most banks is such that a lot of things are hidden which analysts will not be able to see (Sanusi 2010).
            The worrisome reality is that Nigeria is that Nigeria is yet to embrace the global trends in accounting principle. Bore the introduction of IFRS in Nigeria, the central Bank of  Nigeria had introduced the code of corporate governance for Banks in Nigeria (Awoyemi Olufemi 2009), yet the country has unarguably witnessed case of banks and institutional failures resulting from non compliance with the provisions of corporate governance practices.
            It is against this background, that this paper seeks to find out the effect of the mandatory adoption of IFRS on the existing corporate governance practices in Nigeria banking sector.

1.3       Objectives of the Study
            The broad objective of this study is to analyze the  implications of the adoption of International financial reporting standard on corporate governance in the banking sector, with a view to determining whether the adoption of IFRS would strengthen the existing corporate governance or not.
The specific objectives includes,
1.      To determine to what extent directors of banks comply governance with respect to adequate disclosure of relevant information.
2.      To ascertain the impact of the mandatory LFRS adoption on the existing corporate governance practices in Nigeria banking sector.
3.      To ascertain the benefits of adopting IFRS as a global financial reporting standard.

The acquisition of non performing loans (NPL) by Asset management company of Nigeria (AMCON) and injection of equity into the rescued banks in order to bring their net asset value back to zero is an indication that the banking industry is not yet stable (Business Day, 2011).
However, the adoption of international financial reporting standard is a measure to achieving the harmonization of accounting policies so that comparisons of financial information will be easier and more meaningful across jurisdiction (Sanusi 2011),
This chapter focuses on the conceptual, empirical and theoretical literature regarding international financial reporting standard and  its implications on the code of corporate governance practices in Nigeria banks.
A lot of work has been documented by scholars and intellectuals in the area of study, but the review was selected based on information from articles from learned journals, seminar papers, reports, magazines, newspapers and other relevant materials.
The issues reviewed include corporate governance in Nigeria.
2.1 Concept of Corporate  Governance.
For Suleiman (2003), corporate governance is the framework for accountable decision making as well as the structures that turn decision into actions in organization. He further added that it is a combination 0f processes, structures and relationships through which business corporations are directed and controlled.
Oyediran (2003), posits that corporate governance is the way and manner in which the affairs of companies are conducted by  those charged with that duty. For him the governance of limited liability companies in Nigeria is the responsibility of the Board of Directors who oversees the activities of the executives.
            Dozie (2003), observes that, corporate governance is characterized by transparency accountability, probity and the protection of shareholders rights. He further posits that corporate governance refers to the manner in which the power of a corporation is exercised in the management of it’s total portfolio of economic and sociological resource with the aim of increasing shareholder value and safeguarding the interests of other stakeholders in the context of it’s corporate mission. From the above definitions, corporate governance implies rules and regulations which ensure that a company is managed in a transparent and accountable manner so as to ensure the survival of the enterprise.
            Generally, the objective of corporate governance is to strengthen the confidence of investors in the business.

2.2       Empirical review
            Adeyemi and Adesojji (2011) carried out a study on the efficacy of internal and Exteral audit in corporate governance in Nigeria financial sector. They reported that weak internal controls were evident in the sector due to the overbearing influence of the chairman, particularly in family controlled firms and the existent of a rubber stamp board. They researchers used secondary data and simple statistics to express the quantitative aspect of the data.
            At the foreign scene, Joana and Ivy (2011) conducted a study on Accounting evidence, form relative performance evolution around IFRS adoption. They found that with greater globalization and accounting convergence, firms likely increasingly turn to foreign peers as benchmark for managers. According to them, changes in ownership composition can influence corporate governance practices. They used simple statistical method to analyze the result.
            Folajimo (2011) equally carried out a study on IFRS adoption. Implications on management Accounting and taxation in Nigeria Economy. He reported that implementations of IFRs will ensure segment reporting of management accounts for inflow of direct investment, it will give room for good corporate governance for transparent reporting of financial statements. According to him, the global reporting Language will ensure that investors fund are moved easily within the global market. He used chi-square statistical method to analyze the result of the survey.
            George (2010) concocted study on FRS adoption and financial statement effects the case of UK firms. He reported that IFRS implementation has favourably affected the overall financial performance and positions of firms. The study compared the financial performance and positions of firms. The study compared the financial numbers reported under UK GAAP in the pre-official adoption period 2004 with the IFRS re-stated numbers reported in 2004. the logistic regression that is employed uses dummy variables as the dependent variable which is dichotomous and takes two values i.e, “I” for the firms reporting IFRS re-stated financial numbers in 2004 and ‘O’” for firms reporting their accounting figures under UK GAAP is 2004. He used a multiple regression model in his analysis.
2.3       Theoretical Framework
            The theoretical framework guiding this study is Efficient market hypothesis (EMH). The efficient market hypothesis suggests that all information that has a bearing on the value of stocks, bounds and other financial assets will be used to value price of those assets Nwite (2005).
            EMH theory which is associated with the idea of a random walk was propounded by engine Fama (1970).  He opines that security markets were extremely efficient in reflecting information about individual stocks and the market as a whole. EMH is not an  investment theory perse but a philosophy guiding decision making.
            However, in line with the EMH theory the adoption of HRS enables financial  information to be compared easily by investors with companies in related business; so as to inform their decision.

This chapter presents the discussion of strategies adopted in accomplishing the stated objectives. It equally presents the discussion of the theoretical framework upon which this study is based.
3.1       Discussion on the Strategies for Accomplishing the Stated Objectives
i.          Indenturing the extent directors of Banks comply with the code of corporate governance, this objective is accomplished by analyzing the opinions of the respondents using chi-square method.
ii.         In ascertaining the impact of mandatory IFRS adoption on the existing corporate governance practices in Nigeria Banking sector, the objective is accomplished by analyzing the information obtained through secondary data using chi-square method.
iii.       In ascertaining the benefits of adopting IFRS as a global financial reporting standard, this objective is accomplished using the same method as stated above.
3.2       Discussion on the Stated Theoretical Framework
            In assessing the implication of International financial reporting standard (IFRS) on corporate governance, Efficient market hypothesis (EmH) is chosen. The choice of this theory is due to it’s suitability and importance in decision making as state din Nwite (2005), when an individual wants to invest, he will first seek out information. Investments are driven by the quality of market information. This is because, good financial information that makes investment decision efficient depends largely on the qualitative and quantitative characteristics of information such as relevance, reliability, comparability, full disclosure of important accounting policies. The underling rationale behind the introduction of IFRS is to enhance comparability of reliable accounting information by investors.

            This study investigates the implications of international financial reporting standard (IFRS) adopting on existing corporate Banking sector.
            From the academic review, the results of the study showed that IFRS adoption will positively impact on the existing corporate governance culture in Nigeria financial sector. This is because, the mandatory IFRS adoption would reduce information asymmetry and smooth the communication between managers, shareholders, lenders and other interested parties (Bushman and smith 2001). With the mandatory adoption of the global accounting framework, accountants of entities would have to be fully responsive in the use of information technology (IT) applying real time operations in the production of accounting information in the bid to achieving the objectives of IFRS in Nigeria.
Share on Google Plus


The publications and/or documents on this website are provided for general information purposes only. Your use of any of these sample documents is subjected to your own decision NB: Join our Social Media Network on Google Plus | Facebook | Twitter | Linkedin