CHAPTER ONE

INTRODUCTION

1.1Background of the Study

In recent times, a number of Nigerian companies have raised capital from international capital markets; others have established significant presence in other jurisdictions. Also, a good number of Nigerian entities hold the securities of non-Nigerian issuers. As a result of increasing globalization resulting inmore competition, it becomes imperative that countries and companies alike address issuesthat will make them become more attractive of investors’ capital which is like the proverbialbeautiful bride (Essien-Akpan, 2011).Thus, for a better understanding and appreciation of the risks and, consequently, making decisions about the flow of global economic capital, it makes sense that financial statements prepared in Nigeria use global financial reporting standards.

Reforms in Nigeria, like other emerging markets, extended to accounting as a consequence of development in financial markets and economic growth (Jahun, 2012). For example, the Financial Reporting Council of Nigeria Act requires all companies to prepare their financial statements in accordance with the International Financial Reporting Standards.

The implementation of IFRS in Nigeria was motivated by the need to develop high quality financial reporting in order to enhance sound financial and healthy economy and in the wave of globalization; multi-national companies and investment are on the increase. Therefore, the implementation of IFRS in Nigeria is expected to advance the compilation of meaningful data of reporting entities‟ performance for comparability and reliability, facilitate and enhance effective decision making, attract foreign investment, enhance easy access to external capital and low cost of doing trans-border businesses (Madawaki, 2014). The decision to adopt and implement IFRS in a wide and important economic area such as Nigeria cannot be over- emphasized.  However, to achieve that the government need to consider several factors that may affect the implementation of IFRS in developing countries (Zeghal & Mhedbi, 2006), in which Nigeria is among.

IFRS Standards which are usually regarded as principle-based system was established to ensure a high degree of transparency of financial statements, to get better corporate transparency and to enhance the usefulness of financial reporting (Budrina, 2014; Chen, et al 2010; IASB 2012). The central focus is to meet the needs of the wide range of users in economic decisions and contribute positively to a healthy financial market. However, the major concern about the conversion to IFRS is that it is more principle-based and there is a fear that the companies may apply the same rules differently thereby causing varying results. Furthermore, principle-based standards give managers more flexibility to engage in earnings management and consequently resulting in high level of earnings manipulation (Callao, 2010).

1.2 Statement oftheProblem

The implementation of IFRS posed a major challenge for companies. It necessitated implementing expensive financial and accounting computer systems, developing new plans of accounts as well as revaluing assets and depreciation procedures. Business entities are obliged to regularly monitor changes to IFRS and incorporate them when preparing their financial statements.The companies reporting will generally need to change at least some of their systems and practices; investors and others using financial statements need to analyze how the information they are receiving has changed; and securities regulators and accounting professionals need to change their procedures.

The need to promote more comparable financial reports around the globe and to improve the quality of financial reports led to the internalization of financial reports.The absence of the implementation of IFRS would increase information irregularity and weakensthe communication link between the shareholders and alsoincreases the cost of preparing different version of financial statements where an organization is a multi-national.

1.3 Research Objectives

1. To examine whether the implementation IFRS in Champions Breweries has improved the comparability of financial statements.
2. To find out the effect of IFRS implementationon the cost of preparing financial statements in Champions Breweries.
3. To determine whether IFRS implementation has resulted in better annual report in Champions Breweries.
4. To find out the problems confronting the staff of Champions Breweries in implementing IFRS inthe preparation of financial statements.

1.4 Research Questions

1.      Does IFRSimplementation improve the comparability of financial reporting in Champions Breweries?

2.      What is the effect of IFRS implementation on the cost of preparing the financial statement?

3.       Has the implementation of IFRS resulted in better annual reports in Champions Breweries?

4.      Is there any problem confronting the staff of Champions Breweries in implementingIFRS in the preparation of financial statements?

This study will critically examine the following areas with respect to the impacts of IFRS implementation on the comparabilityof financial statements in Champions Breweries.

1.5 Statement of Hypotheses

HYPOTHESIS 1

H0: IFRS implementation does not improve the comparability of financial statement in Champions Brewery

H1: IFRS implementation improvesthe comparability of financial statement in Champions Brewery

HYPOTHESIS 2

H0: IFRS implementation has increased the cost of preparing the financial statements of Champions Breweries

H1: IFRS implementation has not increased the cost of preparing the financial statements of Champions Breweries

HYPOTHESIS 3

H0: The implementation of IFRS has resulted in better annual reports in Champions Breweries

H1: The implementation of IFRS has not resulted in better annual reports in Champions Breweries

HYPOTHESIS 4:

H0: The staff of Champions Breweries confront problems in implementing IFRS in the preparation of financial statements

H1: The staff of Champions Breweries do not confront problems in implementing IFRS in the preparation of financial statements

1.6 Significance of the study

The ultimate goal of every industry or organization including banks is to prepare quality financial reporting (statement) information that be easily compared to the public. This goal can be achieved in public limited liability companies implementing IFRS for effective financial reporting.

This study is necessary because it would enable the managers of Champions Brewery, and other public limited liability companies to improve on their implementation of the standards.It would also help the employers, employees and the potential investors who may want to invest in the company.

The study will provoke further academic discussion among management science researchers, academics, professional accountants, and standard setters in thecountry

Finally, it would serve as a reference source to students or other researchers who might want to carry out their research on a similar topic.

1.7 Scope of the Study

There are many public limited liability companies in Nigeria but it will not be possible to examine them all because of time constraint. In this research work, the focus will be on Champions Brewery in Akwa- Ibom state as well as on the impacts of IFRS implementation on this company. This research work is also limited to the benefits or advantages and the disadvantages of implementing IFRS into the financial statements of Champions Breweries.

1.8 Limitation of the Study

The limitation of this study was inability of management to divulge certain information which they consider sensitive and fear of publication which might be detrimental to their operation.

Another limitation to the study is time constraint. The period within which the study is conducted is short for a thorough research work, hence gathering adequate information becomes very difficult.

Also, finance is one of the limitations to study. The researcher is facing financial constraint to cover typing, movement to meet respondents and facilitations like airtime.

Finally, lack of materials on this topic, this is a fairly new in the area of comparability of financial statement in Nigeria. Therefore, the researcher resolved to seek friendly approach in order to obtain the needed materials or information from the organization under study through the administration of questionnaire.

1.9Definition of Key Terms

1. Financial Statements: it is a formal record of the financial activities and position of a business, person, or other entity.

2. IFRS: It is a set of accounting standards developed by an independent, not for profit organization called the International Accounting Standards Board (IASB).

3. Comparability: It is the ability to compare a set of financial statements with those of prior periods and those of other companies.

4. Implementation: It is the carrying out, execution of a standard or policy of doing something.

References

Budrina M. (2014). The Impact of IFRS Adoption on Accrual-Based Earnings Management: Evidence from Russia. University of OULU.

Callao (2010). Have IFRS affected earnings management in the European Union? Accounting in Europe, vol. 7 159-189.

 Chen, H., Tang, Q., Jiang, Y., & Lin, Z. (2010). The Role of International Financial Reporting Standards in Accounting Quality: Evidence from the European Union. Journal of International Financial Management and Accounting 21(3), 220-278.

Essien-Akpan I. (2011). The International Financial Reporting Standards (IFRS). The Role of theChartered Secretary and Administrator. A paper presented at the 35th Conference of ICSAN.Lagos Sheraton Hotels and Towers. October 26th and 27th. 

International Accounting Standards Board (IASB) (2012). International Financial Reporting Standards, Framework for the preparation and presentation of financial statements (pp. 26): IASCF.

Jahun, K.(2012).Financial reporting framework in Nigeria: Adoption of international financial reporting standards from 2012, from GAAPS to IFRS.

Madawaki, A. (2012). Adoption of international financial reporting standards indeveloping countries: The case of Nigeria. International Journal of Business andManagement,7(3),152-161. doi:10.5539/ijbm.v7n3p152.

Watts, R., Zimmerman, J., (1986). Positive Accounting Theory. Prentice-Hall Inc.

Watts R, Zimmerman (1990). "Positive Accounting Theory: A ten Year Perspective." Account. 65, 131-156.

Zeghal, D., & Mhedhbi, K (2006).An Analysis of the Factors Affecting the Adoption of International Accounting Standards by Developing Countries. The International Journal of Accounting.41, 373 - 386.

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