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1.1        Background to the Study

The world has aptly been described as a global village. This phenomenon have been made possible due to globalization and contionous innovation in information and communication technology (ICT). As a result of these factors, internationalization of economic trade and globalization of businesses is on the ascendency. More so, developing and emerging markets of different nations where businesses are conducted with ease are now the target of the world’s leading industries. Consequently, financial statements prepared according to a nation’s local accounting system may hardly meet the needs of investors, business partners, financiers and decision-makers alike who are conversant with international standards. Thus, for business activities to be carried out successfully across nations; countries must adopt international accounting standards that suit the needs of their investors (Zeghal & Mhedhbi, 2006).

 Prior to this time, most countries had their local bodies that are responsible for developing and issuance of accounting standards. In the case of Nigeria, the Nigerian Accounting Standards Board (NASB) was responsible for developing and issuing accounting standards known as Statements of Accounting Standards (SAS). Progressively, the body was renamed Financial Reporting Council (FRC) of Nigeria as the regulatory body overseeing the adoption and implementation of accounting standards (Okpala, 2012). Thus, in an attempt to formulate a uniform and global accounting standards that would aim at reducing the discrepancies in international accounting principles and reporting practices across countries, the International Accounting Standards Committee (IASC) was founded in 1973 by a group of professional accounting practitioners (Gyasi, 2010). However, in April 2001, the International Accounting Standards Board (IASB) took over the setting of International Accounting Standards from the International Accounting Standard Committee (IASC). By so doing, the IASB updated the already existing International Accounting Standard (IAS) and referred to them as the International Financial Reporting Standards (IFRS). In Nigeria, IFRS was launched in September, 2010 by the Honourable Minister of Commerce and Industry – Senator Jubriel Martins-Kuye (OFR) (Madawaki, 2012).

International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is predominantly used for the preparation of public company financial statements (Mutai, 2014). Financial statements apart from stating the financial position and performance of an organization, provides other information that are valuded by business investors (Iyoha and Faboyede, 2011). Championing this proposition, Ahmed (2003) opined that useful accounting information derived from qualitative financial statements help in efficient allocation of resources by reducing dissemination of information asymmetry and improving pricing of securities. Thus, the quality of financial statements that has been defined as the ability of a financial satement to capture economic realities in order to aid the assessment of the bank’s financial standing (Krishnan & Parsons, 2008), is indispensable to the need of users who requires them for investment and other decision making purposes. Nevertheless, to prepare and report quality financial statements, some accounting conventions and principles known as IFRS that would encourage uniformity and reliability of accounting practises is highly indispensable.

Banking industry are generally renowed for financial transactions. As banking transactions can be conducted among banks regardless of the locality, it is expected that application of a uniform standard of transaction would aid in facilitating effective transactions. Effective adoption of such common body of accounting standard such as IFRS is expected to positively influence quality reporting of financial statements as it enables the practioners to be familiar with one common set of international accounting standards instead of various local accounting standards by Accountants and Auditors of financial reports, compare the uniformity of financial statements among companies, attract foreign investors in addition to general capital market liberalization (Barth, 2007). Elsewhere, adoption of IFRS would aid quality financial reporting as it would reduce the need for supplementary information, expand financial statement disclosure and improve measurement and recognition, understandability, reliability and relevance financial statements (Mutai, 2004). Hence, since IFRS is essential in achieving quality financial reporting, the adoption and practice of IFRS must be given a serious consideration.

1.2     Statement of the Problem

In today’s dynamic business landscape, flexibility and ease of business transactions are increasingly gaining momentum especially in most financial organizations, where the banking sector belongs. As earlier noted in this study, effective functioning of most service organizations like banks depends significantly on the uniformity of financial standards among them. When banking practices and standards are uniform across banks, it directly facilitates the provision of more understandable, comparable, and reliable financial statements; and a reduction in the cost to firms of preparing financial statements.

But in reality, this seems not to be so. The competitive environment of business and weak enforcement of uniform accounting practices has sometimes forced most of these banks to engage in banking transactions in a manner that is devoid of uniform accounting standards. For instance, an enquiry by the researcher showed that most of these banks only frame these financial accounting standards and hang it on the wall without practicing it. This results to lack of trust of the financial statements prepared by such banks. Progressively, it distorts the focus and willingness of business investors, both local and foreign, in investing in such banks as their financial statements could be seen as lacking quality and trust. Over time, this affects the efficiency and overall performance of such banks.

1.3          Objectives of the Study

The main objective of this study is to examine IFRS and the quality of financial statements. The specific objectives are to:

           i.            assess how IFRS improve the quality of financial statements in First Bank Nig Plc;

         ii.            identify the benefits of adopting IFRS in reporting quality financial statements in First Bank Nig Plc ; and

       iii.            identify the challenges of adopting IFRS in reporting quality financial statements in First Bank Nig Plc.

1.4           Research Questions

To achieve the objectives of this study, the following questions were raised:

        i.            How does IFRS improve the quality of financial statements in First Bank Nig Plc?

      ii.            What are the benefits of adopting IFRS in reporting quality financial statements in First Bank Nig Plc?

    iii.            What are the challenges of adopting IFRS in reporting quality financial statements in First Bank Nig Plc?

1.5          Hypotheses of the Study

The following null hypotheses (H0) were formulated for this study:

  H01: IFRS does not improve the quality of financial statements in First Bank Nig Plc.

 H02 : There are no benefits in adopting IFRS in reporting quality financial statements in First  

           Bank Nig pls, and;

 H03:  There are no challenges in adopting IFRS in reporting quality financial statements in First

          Bank Nig pls.

1.6        Significance of the Study

At the completion of this study, it would be of great value in terms of policy formulation. The findings of this study would enable the angencies entrusted with enforcement of uniform accounting standards to be more effective in their effort in making IFRS a tool for quality financial reporting. The findings of this study would also create the need to train and develop financial regulators on international financial standards for the effective adoption and application of best accounting practices. More so, this study would serve as a reference material for students who would be carrying out research on similar subject.

1.7       Scope of the Study

This study focued on the effects of IFRS on the quality of financial statements in Uyo metropolis. The banks chosen in this study was zenith bank because of their position of being market leaders in the banking industry. Also, the content scope of this study was on the historical overview of IFRS, the concept of IFRS, the challenges of adoption and practise of IFRS, the meaning of financial statements, quality of financial statements, and the benefits of adoption and application of IFRS.

1.8       Limitations of the Study

Since this study made use of questionnaire in generating the needed data, the result of this study was therefore limited by the truthfulness of the responses provided by the respondents. Also, since factors in Zenith bank that could facilitate quality financial statements through the use of IFRS cannot be generalized in other institutions, this study was equally limited by this factor. However, regardless of these limitations, this study was still valid towards achieving the objectives for which it was originally designed for.

1.9       Organization of the Study

This study consists of five chapters. Chapter one was the introduction, which was made up of background to the study, statement of the problem, objective of the study, research questions, research hypotheses, scope of the study, significance of the study, limitations of the study, organization of the study, and definition of terms. Chapter two was titled review of related literature. It was designed into three (3) parts: Conceptual framework, theoretical framework and empirical review. Chapter three focused on the research methods adopted in this study. Therein, research design, population of the study, sample size, sampling technique, instrument for data collection, method of data collection, validity of the research instrument instrument, reliability of the research instrument, method of data analysis, and decision rule were all considered. Chapter four considered data presentation, analysis and interpretation as well as test of hypothese, while Chapter five comprised of summary of findings, recommendations and conclusion.

1.10  Operational Definition of Terms

Accounting: This refers to the process of identifying, evaluating and communicating financial information to the end-users for important decision-making.

Financial Statements: This refers to a record showing the finnacial standing of an organization.

International Financial Reporting Standard (IFRS): This refers to international recognized accounting standard that typifies how financial statement and other accounting practices should be done.

Quality: This means the degree to which financial statements of banks are able to capture in clear terms their financial transactions in such as way that the bank’s financial performance could be easily assessed.

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