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This study arose out of the need to justify the adoption of International Financial Reporting Standards (IFRS) in Nigeria.  The thesis is that the adoption of IFRS should improve accounting quality and hence, investors should make qualitative decisions. Financial ratios that addressed profitability, liquidity, solvency and growth in investments were calculated from the financial statements of companies that were into the production of consumption and industrial goods. The structural hypothesis under confirmation is that financial ratios under Nigerian Statements of Accounting Standards (SAS) and IFRS do not differ on grounds that Nigeria has long adapted accounting standards issued by the International Accounting Standards Boards. Each participatory financial ratio was calculated from financial statements prepared under IFRS and SAS regimes in the same year. Exploratory analysis and Wilcoxon tests for differences in the distribution of each financial ratio was conducted using SPSS facilities Version 20 to detect whether a financial ratio increased or decreased under IFRS regime. The study finds no significant increase/decrease in the participatory financial ratio under the IFRS regime. It was recommended that a further study be conducted to address other metrics of accounting quality. 


Title Page
Table of Content
List of Tables and Figures
List of Appendices

1.1       Background to the Study
1.2       Statement of the Problem
1.3       Objectives of the Study
1.4       Research Questions
1.5       Hypotheses of the Study
1.6       Scope of the Study
1.7       Significance of the Study
1.8       Operational Definition of Terms

2.1       Conceptual Framework
2.2       Theoretical Framework
2.3       Review of other Studies
2.4       Summary of Literature Review

3.1       Design of the Study
3.2       Population and Sample Size
3.3       Measurement of Variables
            3.3.1    Profitability
            3.3.2    Short-Term Solvency (Liquidity)
            3.3.3    Long-Term Solvency
            3.3.4    Growth in Investment
3.4       Method of Data Collection
3.5       Method of Data Analysis

4.1       Introduction
4.2       Data Presentation
4.3 Fieldwork Report
4.4  Data Analyses
4.5       Answers to Research Questions and Test of Hypotheses
            4.5.1    Research Question 1 and Test of Hypothesis 1
            4.5.2    Research Question 2 and Test of Hypothesis 2
            4.5.3    Research Question 3 and Test of Hypothesis 3
            4.5.4    Research Question 4 and Test of Hypothesis 4
4.6       Discussion of Findings

5.1       Summary of Findings
5.2       Conclusion
5.3       Recommendations
5.4       Suggestions for Further Studies



1.1              BACKGROUND TO THE STUDY     
In the last quarter of the previous century, the world economies moved speedily towards globalisation. Multinational companies are manufacturing and selling across the world and many of these firms are listed at foreign stock exchanges. Globalisation of markets and establishment of multinationals led to increased desire and awareness about international markets. This was soon followed by globalisation of financial markets which increased the value of understanding of international financial results and reporting formats. Rapid improvement in communication technologies and easy access through internet has further spread the profile of international investor. Nowadays international investors are not limited to some portfolio managers in big banks. International investors are now as diverse as sophisticated equity manager to a small investor in a remote town. Investors too have diversified their portfolio by international equities and bonds. This rapid globalisationfuelled the desire to have common global standards that could be understood, applied and followed across nations.
Nigeria’s Statements of Accounting Standards (SAS) align substantially with the pronouncements of the International Accounting Standards Board (IASB) but maintained its own unique structure and peculiarities until January 1, 2012. The International Accounting Standards (IASs) are principles based, and the Nigerian Accounting Standard Board (NASB) implementsthe (IASs) in specific contextsin the formulation of its standards. When there is no NASB SAS on the treatment and disclosure of information, the relevant IAS is invoked. This suggests thatNigeria adopted IFRS since its inception. On the premise that the International Financial Reporting Standards (IFRSs)are off shoot of IAS, it becomes an issue whether the formal move of Nigeria to adopt IFRSs in January 1, 2012 is anything extraordinary.

 IFRS permits considerable discretion or flexibility in disclosure of financial information regarding certain transactions. They also debar certain alternatives which eliminates accounting information distortions. In a sense, the availability of alternatives guided by principles can lower the quality of accounting information. IASB provides broad guidelines as principles for member countries to adopt or adapt and, in consonance, Nigeria adapted the IFRS by making them specific for reporting entities. This approach permits generalisation of uniformities of accounting information within the Nigeria context. The adoption of IFRS, then, suggests that reporting entities are accorded freedom of discretion to choose from options allowed by a standard which hitherto was not available in a rule-based jurisdiction like Nigeria.If this is correct, then, the adoption of IFRSs should lower quality of accounting information.The adoption of IFRS suggests that where alternative treatments of transactions are permitted, all reporting entities would exercise discretions and disclose the choice of alternative for users of accounting information. In blunter terms, this increases information asymmetry and, hence, lowers quality of accounting information. Leuz, C., Nanda, D and Wysocki, P. D (2003), and Langmead and Soroosh (2009) also subscribe to this argument when they assert that IFRSs lack detailed implementation guidance which affords managers greater flexibility to exploit accounting discretion to their advantage.

The argument advanced in the literature for the adoption of IFRS is that it reduces the opportunity to overstate earnings or delay recognition of losses (Ewert and Wagenhafer, 2005; Barth, M, Landsman, W and Lang M. (2008). Ahmed, A. S., Neel, M. and Wang, D (2013) argued that IFRSs are principles based and as such difficult to structure transactions to avoid recognition of a liability, but they lack implementation guidance (Langmead &Soroosh, 2009); as an example, IFRS is broad in revenue recognition for multiple deliverables, and this can afford managers discretionary interpretation which can lead to distortion of accounting information. Irrespective of the direction of the argument—for or against—the fact remains that Nigeria has since adopted IFRS in disguise, but for better rather than worse—“Better” in the sense that Nigeria tailored IASs to limit flexibility accorded managers of firms, and hence limits opportunity to game on information disclosure.

Every country is unique in terms of culture and controls, and Nigeria is no exception. NASB took into cognisance weaknesses in financial controls to address culture when it adapted IASs foruse. Therefore, the formal adoption of IFRS suggests that managers of reporting entities have been awarded a licence to exercise discretion inadjusting and mal-adjusting the Nigerianisation in financial controls. Obazee, the Executive Secretary and Chief Executive Officer of Financial Reporting Council of Nigeria (FRCN), aligned himself with this statement when he stated that“… [C]ouncil will require management assessment of internal controls including information systems controls with independent attestations... and Council is to exercise strict oversight of professional practice” (Obazee, 2012, pp. 23-25).

Nigerian Statements of Accounting Standards offer little opportunity to manage earnings as there are tighter restrictions in terms of guide and rules. This restriction, perhaps, explains the refusal of multinational companies operating in Nigeria to adopt SASs (cf. “Nigeria’s Financial Hub”, 2011).Prior to the enactment of NASB Act No. 22 of 2003, the SASs were not accorded the status of law, and hence Nigerian Standards were not wholeheartedly observed by reporting entities.The main legislation that guides information disclosure then is the Companies and Allied Matter Act (CAMA, 2004) though it makes provisions on the role of the NASB in relation to accounting matters (see Section 335 and 356).Where SAS is in conflict with CAMA requirements, the former prevails. Such was the case when SAS 18 on Statement of Cash Flows was issued. This is in line with Section 356 of CAMA.


The fundamental problem is  that management could manipulate accounting ratios to influence share prices but proper disclosure is expected to guide against this. The extent to which transition to IFRS can effectively do this which is the problem being investigated. This question is important because NASB has consistently adapted the International Accounting Standards (IAS) under the International Accounting Standards Committee (IASC) to suit the peculiarities of the Nigerian economy and any new form of transaction that may emerge.  The thesis is thatif the IFRS are offshoots of the IAS, then the transition to IFRS should not affect the financial statement ratios. Consequently, the study addresses four broad brush issues that border on performance appraisal by existing and potential investors......

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