CHAPTER ONE INTRODUCTION

1.1 Background to the Study

Accounting standards have changed greatly over the past decades with regard to the consistently

increasing emphasis placed on measurement of assets base on fair valuation and pressing need

for harmonization. However, in order to address the need of various users of financial

information, locally formulated standards limit the ability to undertake cross boarder

comparison. Therefore, the need for harmonizing of global financial accounting increased. The

journey for the international harmonization toward a unique and global set of accounting

standards started in 1973 when 16 professional accounting bodies agree to form the International

Accounting Standard Committee (IASC).

The rationale behind the formation of the Committee was to produce and issue the International

Accounting Standards (IAS) which came out of necessity to encourage growth in trade and

investment between countries around the globe. The Committee was reorganized in 2001 to

become International accounting Standard Board (IASB) which develops and issues International

Financial Reporting Standards (IFRSs). Consensus has been reached that quality of accounting

reporting is paramount to the information users for various decisions making purposes. IFRSs are

increasingly becoming more acceptable set of regulations followed by many countries. In an

effort to increase comparability, European Union mandated the adoption of IFRS to all its public

entities in 2005. It is reported that more than 130 countries conformed to IFRSs as domestic

reporting standards with 90 countries fully adopted (PWC, 2016).

Prior to international financial reporting standards, different countries develop their own

standards locally and also to a certain extent adopt or adapt that of the other countries. In

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Nigeria, National Accounting Standard Board (NASB) develop and issue Statements of

Accounting Standards (SAS) which are popularly known as Generally Accepted Accounting

Principles (GAAP). These standards cut across various aspect of accounting activities such as

recognition, measurements, and reporting of accounting transactions of various form of business

activities. Therefore, SAS play a vital role in regulating the activities of accounting locallydue to

the fact that financial reporting practicebefore IFRS depend on legal, economic, cultural and

historical background of any country.