COMPARATIVE ANALYSIS OF SAS AND IFRS EFFECT ON FIRMS FINANCIAL REPORTING IN NIGERIA
ABSTRACT
The study examined the comparative analysis of SAS and IFRS effect on firms financial reporting in Nigeria The objective was to specifically find out the level of investors’ confidence on the quality of financial reporting in Nigeria based on the accounting standards; to examine the relationship between accounting standards and full accounting disclosure in Nigeria; and to examine the deficiencies in the Nigerian accounting standards application to financial reporting. To achieve this very objective, primary data through structured questionnaires were administered to respondents in the field to elicit their responses. The findings we obtained were robustly discussed in the last part of the study. It is therefore recommended that to ensure quality financial reports in Nigeria, firms should adopt and implement the IFRS in terms of financial reporting in Nigeria as this will guarantee high competition and win investors’ confidence.    
CHAPTER ONE
INTRODUCTION
BACKGROUND TO THE STUDY
    There is no doubt that published annual reports are required to provide myriad of users of accounting information which include shareholders, potential investors, employees, suppliers, creditors, financial analysts, stock broker, management and the government agencies true  reliable information for making prudent, effective and efficient decision making.
    This extent and quality of the decision made is directly dependent on the very accounting standards upon which they are prepared. When financial statements are prepared by the corporate directors of an organization, it is expected to be in adherence to accounting policies rules and regulations such that the reports can reflect the true financial performance and position for and at a given period of time.
    In Nigeria, all financial reports of firms are prepared in line with the statement of accounting  standards  (SAS), produced by the Nigeria accounting standard board (NASB) and other extant laws such as BOFIA, CBN prudential guidelines, etc. Over the years the Nigerian accounting standard board (NASB) has continually updated the various standards it produces in order to ensure quality financial reporting in Nigeria and beyond.
    The Nigeria business environment however has witnessed changes over the years mainly influence by globalization and technological innovation (Egedegbe, 2009). Companies in Nigeria are now vying to penetrate the international markets for business transactions as never before. For those companies to compete meaningfully with their international counterparts, they need to prepare accounts in accordance with the international accounting standard (IAS) due to the fact that the world has gradually become a global village. There is therefore, the clamour for the full adoption of the international accounting standard (IAS) and the international financial reporting standard (IFRS) so as to guarantee quality financial reporting by corporate organizations in Nigeria.
    In fact, Nigeria is recently taking drastic steps to align all corporate financial reports with that of the IFRS as a means of enhancing full disclosure, strengthening stakeholders’ confidence and above all to ensure adequate and quality in the financial reports of Nigerian firms locally and internationally (Adeyemi, 2010). The Nigerian stock exchange has directed all companies  that are listed on the floor to fully adopt the IFRSs by January 1st 2012 while the central bank of Nigeria has also told Nigerian banks to adopt IFRSs by December 2010 (Okike, 2009).
    In a study conducted by the world bank group on the observance of accounting standards and codes for Nigerian firms to ensure quality financial reporting, it was observed that the Nigerian financial reporting practices are deficient (world bank group, 2004). The statement of accounting standard (SAS) seem to be incomplete because  there are many accounting issues not yet covered in these standards which has been addressed by the international financial reporting standards (IFRS) (Nnadi, 2009).
    Against this backdrop, this study is undertaken to carry out comparative analysis of SAS and IFRS effect on firms financial reporting in Nigeria.
1.2    STATEMENTS OF THE RESEARCH PROBLEMS
    Over the years, extensive revisions have been conducted on the IFRS which have not been reflected in the SAS; large sections and paragraphs in IFRS which are newly included cannot be found in the SASs deemed to ensure quality financially reporting among quoted firms in Nigeria. The SAS does not cover all the aspects of financial reporting and are not sufficient to form a basis of preparing a high quality financial statement (Wallace, 2008). Accounting standards and reports in Nigeria have been found to be deficient overtime (Nzekwe, 2009), in the sense that they lack vital information that will enable stakeholders make informed decisions and judgment. In the light of above lacuna, the following specific research questions are raised;
1.2.1    RESEARCH QUESTIONS
What is the level of investors’ confidence on the financial reporting in Nigeria?
What is the relationship between accounting standard and firms’ accounting disclosure in Nigeria?
Are there differences between SAS and IFRS application to financial reporting in Nigeria?
What are the benefits of adopting the IFRS to enhance quality financial reporting in Nigeria?
1.3    OBJECTIVE OF THE STUDY
    The objective of this study is basically divided into two, general and specific objective. The general objective is to examine accounting standards and the quality of financial reporting in Nigeria. However, the specific objectives are as followed:
To found out the level of investors’ confidence on the financial reporting in Nigeria
To examine the relationship between accounting standard and firms’ accounting disclosure in Nigeria
To find out the differences between SAS and IFRS application to financial reporting in Nigeria
To examine the benefits of adopting the IFRS to enhance quality financial reporting in Nigeria
1.4    STATEMENT OF RESEARCH HYPOTHESES
    In order to validate the relationship between the variables in this study, the null hypotheses are postulated as follows:
Ho: There is no poor level of investors’ confidence on the quality of financial reporting standards based on the Nigerian accounting standards.
Ho: There is no positive relationship between accounting standard and firms’ full accounting disclosure in Nigeria.
Ho: There are no deficiencies in the Nigerian accounting application to financial reporting in Nigeria.
1.5    SCOPE OF THE STUDY
    This study examines accounting standards and the quality of financial reporting in Nigeria. The study covers the financial reporting of quoted firms operating in Benin City. Structure questionnaire shall be drafted and administered to the practicing accountants and stakeholders of the firms selected in this study.
1.6    SIGNIFICANCE OF THE STUDY
    Accurate corporate financial reporting is a necessary tool for the short-term and long term survival of any nations. It aids budgeting, planning and efficient decision making. Thus, the study is relevant to the Nigerian government, investors, business management, regulatory bodies, educators, researchers, practicing accountants, auditors and scholars particularly in the field of accounting.
    With the outcome of this study, the regulatory authorities such as the Nigerian Accounting standard board (NASB), Nigerian stock exchange (NSE) and the securities and exchange commission (SEC) would be able to ascertain the obvious deficiencies in applying SAS to financial reporting in Nigeria environment and the need to ensure full compliance to the adoption of IAS and IFRS to guarantee quality financial reporting in Nigeria. Future researchers definitely will benefit in this study.
1.7    LIMITATION OF THE STUDY
    The obvious limitation of this study is the level of respondents’ response and the problem of generalizing the findings.
 REFERENCES
Adeyemi, S. B. (2010). “Impact of accounting standards on financial reporting in Nigeria, unpublished phd thesis, university of Lagos.
Egedegbe, M. (2009). Adoption of IFRS on the NSE, retrieved from http//www.stockmarketnigeria.com/2009/04/21 adoption of IFRS on the vise.
Nnadi, G (20090 financial reporting; Nigeria retrieved from http://www.finanicalnigeria.com/news/men item.
Nzekwe S. (2009). ANAN commends secrete on financial reporting council bill, guardian news paper.
Okike, E.N.M (2010). Extension of information in accounting reports. An investigation. Nigeria financial reviews vol.3 no.2             
Wallace, R.S.O (2008). Corporate financial reporting in Nigeria, accounting and business research journal. Vol. 18, No. 7 Pp 352-362.
World bank 92004). Report on the observation of standards and codes (ROSC) Nigeria. Accounting and auditing. Retrieved from http://www.worldbank.org/ita.rosc