ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARD: IMPACT ON QUALITY OF INVESTMENT DECISION MAKING (A CASE STUDY OF FIRST BANK PLC)
This study seeks to investigate whether the International Financial Reporting Standards (IFRS) in Nigeria has improved the quality of investment decision making in Nigerian Banks. It is phenomenon for every organization (including banks) to adopt (IFRS) as it ensures transparency, accounting quality and reduced cost of capital. Thus, the desire to examine the impact of IFRS on quality of investment decision making in First Bank of Nigeria Plc, Uyo ignited this study. To achieve this objective, five research questions and three research hypotheses were formulated to guide this study. A well structured questionnaire was used as the major instrument to gather data from the 50 staff and personnel First Bank of Nigeria, Plc, Uyo and a sample size of 38 was randomly selected. The data collected from the respondents were analyzed using simple percentage and Chi-square statistical tool was employ for testing the hypotheses. The study concluded with some recommendations that steps should be taken to ensure a successful adoption and implementation of IFRS in Nigeria, Government and the regulators should ensure that there is availability of training facilities and materials for professional accountants on the concept of IFRS and issues relating to its implementation and conversion. Finally, top management, external auditors and regulators being the key players in standards, need to work together and tighten compliance so that impact of IFRS could be felt more.
1.1 BACKGROUND OF THE STUDY
This study sets out to examine whether the impact of International Financial Reporting Standards (IFRS) in Nigeria has improved the quality of investment decision making in First Bank of Nigeria Plc. Nigeria adopted IFRS, and then referred to as International Accounting Standards (IAS), in 1999 through a resolution by the Council of the Institute of Certified Public Accountants of Nigeria (ICPAN), the legally mandated accounting institute in Nigeria. The study compares changes in the quality of accounting between the pre-adoption period from 1995 to 1999 and the post adoption period from 2000 to 2004. The study specifically tests whether there is less earnings management, more timely loss recognition and higher value relevance in the adoption period as opposed to the pre adoption period. It also takes a global perspective to the IFRS question in relation to quality. The outcomes of the study show mixed results with some of the metrics indicating a marginal increase in accounting quality and others showing a decrease in the quality of accounting.
Since their inception, International Accounting Standards have been produced by two bodies. The first, the International Accounting Standards Committee (IASC) came up with 41 accounting standards between 1973 and 2000. The IASC was replaced by the International Accounting Standards Board (IASB) in the year 2000. The new Board embarked on a review processes aimed at refining the standards. The result was a reduction in the number of standards from 41 in the year 2000 to 28 by the year 2008. By 2011, 13 standards had been issued by the board as International Financial Reporting standards (IFRS). According to IAS Plus (2010), IFRS refers to the entire body of IASB pronouncements including standards and interpretations approved by IASB, IASC and their interpretations produced by the Accounting Standards Interpretations Committee (IASIC).