Introduction
1.1 Background of the Study
The adoption of International Financial Reporting Standards (IFRS) in Europe and around the world represents perhaps the most important accounting regulatory change in recent time. The use of IFRS as a universal financial reporting language in gaining momentum across the globe as more countries are adopting IFRS or converging their local standards with it.
Globalization of capital market is an irreversible process and there are many potential benefits to be gained from mutually recognised and prospected international accounting standards. The move towards developing an acceptable global high quality financial reporting standards started in 1973 when the International Accounting Standards Committee (IASC) was formed by professional accounting bodies from Canada, United States of America, United Kingdom, Germany, France etc. The IASC was to formulate uniform and global accounting standards aimed at reducing the discrepancies in international accounting principles and reporting practice. In this light the IASC was established and has actively been championing the uniformity and standardization of accounting principles for over two decades Carson in Madawaki (2012;152). In April 2001, the IASC was reorganized into International Accounting Standards Boards (IASB). Thenceforth, the IASB has updated the already existing international accounting standards and referred to them as IFRS.
IFRS are a single set of high quality understandable standards for general purpose of financial reporting which are principles based in contrast to the rules based approach.
In Nigeria, adoption of IFRS was launched in September, 2010 by the honourable Minister, Federal Ministry of Commerce and Industry, Senator Jubril Martins − Kuye (OFR). The adoption was organised such that all stakeholders use the IFRS by January 2014. The adoption was scheduled to start with public listed entities and significant public interest entities who are expected to adopt the IFRS for statutory purposes by January 2013 and small and medium − sized entities shall mandatorily adopt IFRS by January 2014, Jubril M.K and Michael ,P (2010).
The year 2012 marked significant water shed in Nigeria’s financial reporting as the country wholly adopts international Financial Reporting Standards (IFRS) as its financial reporting framework with effect from January 1st , 2012. In line with recommendations of the committee on the Roadmap for the adoption of IFRS in Nigeria which were accepted by the government and officially unveiled on September 2nd , 2010 at Transcorp Hilton Hotel, Abuja, as listed companies and significant public interest entities in Nigeria must adopt IFRS by January 1st , 2013 while small and medium-sized Enterprises (SMEs) will key into the initiative by January 1st , 2014. By implication, all SMEs will statutorily be required to issue IFRS based financial statements for the year ending 31st December, 2014. Entities that do not meet the IFRS criteria for SMEs shall prepare and issue their report using SMEs Guidelines on Accounting (ie Tier 3 or Micro-GAAP) issued by the GENEVA-based united nations conference on Trade and development (UNCTAD) (Asein 2010).
The public sector, the chief driver of the nation’s economic activities will similarly adopt international public sector Accounting Standards (IPSAS) from Jan. 1st, 2013. The delay in the sector commencement is explained fact that will have first former transit from current cash accounting to modified accrual accounting. The compliance by the sector will complete the entire trade circle. The view is rife that this strategy no doubts, enhances Nigerian’s percept foreign investors, reduce its risks and provide a reliable, comparable investment destinations on the continent. The Readings is composed of Nigeria Accounting Standard Board (NASB), the institute of chartered accountants of Nigeria (ICAN), Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC) and other stakeholders in the financial reporting process (Mackenzio Bruce et al (2011). According to NASB (2010), the federal government of Nigeria responded to many significant accounting and reporting inadequacies and departures from norms passed unnoticed by the promulgation of the Nigeria Accounting Standard Board (NASB) inspectorate unit as a better version of an evolutionary approval by the government to strengthen compliance with accounting standards and to enhance reliance. Added to this, the Nigerian government introduced major reforms aimed at promoting confidence in corporate reporting and governance. The pursuit of these reform mandates gave rise to such measures in government as the fesh-oning of the fiscal responsibility bill, implementation of the new oil and has unit, parastatatal support unit, the setting up of Economic and Financial Crimes Commission (EFCC), the Independence and Corrupt Practices Commission (ICPC) and the Nigeria extractive industries transparency initiatives. It also attracted development partners coordination flag bearers such as the World Bank group and Department for International Development (DPID).
In the midst of these developments, it becomes clear that the Nigerian government needed to engage in wide ranging views that recognize corporate reporting knowing full well that the world. Economies are how inter connected symbiotic them every one really understand.
Judging from the global financial crisis, it is obvious to all that nations have strained the present system of differential national financial standards to its limit. Nations that are truly desirous of attracting more foreign direct investment, enhancing job opportunities and economic transformation are now aiming to free their countries from the limits of the present system.
This requires re-appraisal of legal framework, institutional framework, human capacity building. The FRC Act 2011, ensured from the re-appraisal of the legal and regulatory framework with regard to the financial reporting regime in Nigeria.
Corporate governance failures have now been proved to be at the heart of the current financial crisis. This is owing to the fact that corporate boards did not live up to their responsibilities and the gatekeepers we financial analysts and prudential regulators did not draw the investing public attention to systemic risks. The solution to all these is the internalization of financial reporting benchmarks and hence the adoption of international Financial Reporting Standards
However, the successful adoption and implementation of these standards will remain a mirage in any country including Nigeria, Madawaki (2012): 152). In the light of this therefore, this study focused on the process of adopting the IFRS in Nigeria as a developing economy ,the benefit and challenges of adoption, bearing in mind prevailing domestic legal and regulatory frame work of accounting.
1.2 Statement of the Problem
The major problem that necessitated this research work is to examine the adoption and implementation of International Financial Reporting Standards (IFRS) Issues and challenges on the Nigeria economy.
- Lack of implementation of IFRS in the preparation of financial statement by various firms in Nigeria has led to poor relationship between IFRS Adoption and gross domestic product of Nigeria.
- Previous studies has shown that there is poor implementation of IFRS disclosure requirement and this has adversely affected the National income of Nigeria.
- Poor knowledge of the IFRS Adoption in Nigerian has negative impact on the total revenue of Nigeria.
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