INTERNATIONAL FINANCIAL REPORTING STANDARD (IFRS): IMPLICATIONS ON CORPORATE GOVERNANCE IN NIGERIA FINANCIAL SECTOR

SEMINAR PAPER PRESENTED IN PARTIAL FULFILLMENT FOR THE AWARD OF MASTER OF SCIENCE (M.Sc.) DEGREE IN ACCOUNTANCY

DEPARTMENT OF ACCOUNTANCY
FACULTY OF MANAGEMENT SCIENCE

ABSTRACT
International Financial Reporting Standards (IFRS) is being given global recognition, with a view to ensuring consistency, in financial reporting. Arguably, the adoption of International Financial Reporting Standard, (IFRS) makes the conduct of international business easier as it facilitates the raising of fund in the capital market.  The objective of this paper is to evaluate the implications of the adoption of international financial standards (IFRS) on corporate governance practice.  The paper examines empirical literature to identify the effects of the adoption international financial reporting standards on the existing corporate governance. The paper concludes that IFRS will positively strengthen the exiting corporate governance practices in Nigeria financial sector by giving room for transparent reporting of financial information.

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TABLE OF CONTENTS
Abstract
Table of Contents
CHAPTER ONE:  INTRODUCTION
1.1             Background of the Study
1.2       Reporting Format between GAAP and IFRS
1.3       Statement of Problem
1.3       Objectives of the Study
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1       Introduction
2.2       Concept of Corporate Governance
2.3       Academic Review
2.4       Theoretical Framework
2.5       Link Between IFRS and Corporate Governance
CHAPTER THREE: DISCUSSION
3.1       Introduction
3.2       Discussion on the Strategies for Accomplishing
the Stated Objectives
3.3       Discussion of the Stated Theoretical Framework
3.4       Discussion of the Reviewed Literature
3.5       GAPS in the Literature
CONCLUSION
REFERENCES

THE IMPLICATIONS OF THE ADOPTION OF INTERNATIONAL FINICAL REPORTING STANDARDS ON CORPORATE GOVERNANCE IN THE BANKING SECTOR IN NIGERIA

CHAPTER ONE
INTRODUCTION
1.1       Background of the Study
            Prior to the advent of International Financial reporting standard (IFRS) as a global reporting standard, every country has it’s own standard accounting practice version of generally accepted accounting principle (GAAP).
            In Nigeria, the preparation of entity’s financial statement was hitherto, based on her local statement of Accounting standards (SASs) issued by Nigeria Accounting Standard board (NASB). The statement of Accounting Standard which is a blue print from GAAP, usually contain references at the concluding part of the standards to the effect that each of the 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 Nigeria’s SASs and the International Accounting Standards (IAS). The 2003 & 2004 World Bank’s report on the observance of standards and code (ROSc) in Nigeria (p.8); showed that there is a gap when SASs are compared with their International equivalent. It was found that even though; Nigeria’s SASs are based on IAS, the Accounting Statements are outdated, and does not meet the needs of a modern financial system. In the words of Folajimi (2011), the SAS does not inspire Investor’s confidence, and hence, present obstacles to the growth and internalization of Nigeria’s banking sector.
            In the light of the above, financial Statements are reconciled with different Nation’s Accounting Standards, hence the need for a Universally accepted accounting Standard. IFRS sprang from the need to harmonize the work of International Accounting standard committee (IASC) and International Accounting standard Board (IASB) into a common framework for global adoption Ojeka (2011).
            With the globalization of the capital market, there is the need for Nigeria to harmonize her accounting standards in order to ensure comparability and reliability of accounting Information. IFRS has been accepted as the basics for reporting in major emerging international market. It is included in the Financial Stability Forum (FSF) as one of the key standards for sound financial system and used by the World Bank as part of it’s standards and codes initiative (SCI) Folajimi (2011).  With the universal adoption of IFRS as a global standard for preparation of financial statement investors can now effectively do cross border business. 
    Today, more than 100 countries of the world have adopted IFRS as a global financial reporting standard.  In Nigeria, the adoption of IFRS is expected to take place in four phases beginning with the public listed companies in 2011, significant public interest entities in 2012, other public interest entities in 2013, and small and medium scale entities in 2014.

1.2       Reporting Format Between GAAP and IFRS
    There are differences in the reporting format between the generally accepted accounting principle and the international financial reporting Standard(IFRS).

Reporting Format: INCOME STATEMENT IFRS
There is no prescribed format for the income statement.  The entity should select a method of presenting its expenses by either function or nature.  Generally IFRS requires a minimum format of presentation of the following items on the face of the income statement:
1.         Revenue
2.         Finance cost
3.         Share of post–tax result of associates and joint ventures associated for using the equity.
4.         Method
5.         Tax expenses
6.         Post tax gains or loss attributable to the results and to re-measurement of discontinued operations.
7.         Profit and loss account for the period.
            The portion of profit attributable to the minority interest and to the parent entity is separately disclosed on the face of the income statement as allocations of profit or loss for the period.

GAAP: Presentation of Income statement is done in one of two formats
1.         A single step format where all expenses are classified by function and are deducted from total income to give income before tax.
2.         A multiple step format where cost of sales is deducted from sales to show grow profit and other income and expense are then presented to give income before tax.

1.3       Statement of Problem
            Recently, the central Bank of Nigeria (CBN) rescued Eight commercial banks after the consolidations exercise. The consolidation of banks in Nigeria perhaps, contributed to restore the confidence of the investing public in the banking industry. On the other hand, the recent development in the banking industry that affected the eight commercial banks which had been given a clean bill of health by the apex bank is perhaps an indication of weakness in corporate governance and risk management practices.
            In the same vein, some of the rescued banks hide multibillion naira losses in deferred taxes Business (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. 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 yet to embrace with the global trends in accounting principles. Before the introduction of IFRS in Nigeria, perhaps, there has been in existence the code corporate governance and code of best practices, yet the country has unarguably witnessed cases of banks and institutional failures arising from problems of technical financial distress, unprofessional and unethical practice and standards.
            It therefore, makes a research sense to find out, whether the corporate governance practices have failed, and if not, what is likely the effect of the adoption of IFRS on the existing corporate governance practices in Nigeria Banking Sector.
            It is based on the above stated problems and question, that this study seeks to address.

1.3       Objectives of the Study
            The broad objective of this study is to analyze the implications of the adoption of International finical reporting standards on corporate governance in the banking sector in Nigeria while the specific objectives include;
(i)        To determine the effectiveness of corporate governance practices in Nigeria.
(ii)       To ascertain the influence of IFRS adoption on the existing corporate governance practices.

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