Beruflich Dokumente
Kultur Dokumente
Countries of the world over are complying with the provisions of IFRS while the entire world is seen
as a global village where exchange of information and economies depend on each other for survival.
Australia adopted IFRS from 1 January 2005. The assumption made by Australian regulators is that
adoption of IFRS will facilitate cross-border comparability in financial reporting, thereby raising the
visibility of Australian businesses internationally and potentially reducing the cost of capital. The
main motivation is that while the Fourth and Seventh Company Law Directives provide a basis for
harmonised accounts for both individual and groups of companies within the Economic Union (EU),
they did not meet more rigorous disclosure requirements elsewhere in the world, particularly
As stated by the Treasury Department of the Federal Government: The Government has long
recognised the benefit to Australia of a common global accounting language. In a globalised economy
with large and growing cross-border capital movements, high quality internationally accepted
accounting standards will facilitate cross-border comparisons by investors and enable Australian
companies to access international capital markets at lower cost. Reducing international financial
reporting diversity has been widely touted as a major goal of the Treasury Department, and the
Financial Reporting Council (FRC) which oversees accounting standard setting in Australia. The
Treasury Department of the Australian Government explained what the harmonisation of accounting
Any departures by Australia from IASB standards could rapidly erode the advantages of a common
language and in particular the acceptance overseas of Australian companies’ financial statements as
IASB compliant. With the mandatory introduction of IFRS in the EU and Australia, a reduction in
financial reporting diversity might be expected as stated by Whittington (2005, p.129). The adoption
of international standards by the EU is a good example of the nature of the demand. There was no
existing single set of accounting standards within the EU: rather there was a variety of national
national traditions and institutional arrangements. There are currently 15 countries in the EU, 3 in the
Economic Area, and 10 more countries scheduled to join in 2004 making a total of 28 countries, so
that, without common accounting standards, there could be 28 different national methods of
accounting, in addition to the use of IFRS and of US GAAP which is permitted by some EU countries.
A large number of public companies, exhibiting significant heterogeneity in size, capital structure,
ownership structure and accounting sophistication, have adopted IFRS for the first time (Schipper,
2005). Even in Australia, where standard setters have committed to an established accounting
standards harmonisation program since the mid-1990s, IFRS have nevertheless introduced a raft of
new practices and standards, particularly in controversial areas such as recognition and measurement
of financial instruments, intangibles and investment properties (Reilly & Teoh, 2006). However, while
introduction of IFRS to have some impact on financial reporting diversity, this is not necessarily a
foregone conclusion if prior literature is a guide. For instance, the literature distinguishes between
accounting practice harmonisation and accounting regulation harmonisation (Rahman & Perera,
2002). Harmonizing financial practices cannot necessarily be achieved solely by aligning regulatory
frameworks (such as introducing a new accounting standards regime). For instance, Henry et al.
(2009) observed that among EU companies, net income and shareholders’ equity reconciliation
amounts differ significantly by industry and by legal origin of the firm’s home. The authors raise
questions about the homogeneity of IFRS as implemented by companies in the EU (see also
Clatworthy and Jones, 2008; Gray et al., 2009; Kvaal and Nobes, 2010). Jones and Higgins (2006)
predicted that smaller companies may be less compliant with IFRS in the early years of
implementation given the high cost of the regulation and the lower perceived benefits of IFRS to
smaller companies. Schipper (2005) and Brown and Tarca (2005) emphasised the importance of
enforcement that is separate from the financial reporting standard setting function.’ In the absence of
effective enforcement, the ultimate impact of IFRS in reducing international reporting diversity could
be much diminished nor would we necessarily expect the pattern in reduction in financial reporting
diversity across all IFRS adopting nations to be uniform or consistent (see Kvaal and Nobes, 2010).
For example, in a study of Finnish accounting standards, Pirinen (2005) found that while the effects of
IFRS have been notable, the standards have not caused any drastic changes in accounting practice as
their requirements have been written as alternatives in legislation (EU Directives were written into
Finish accounting legislation in the 1990s). Similar to developments in the UK, Australia had
introduction of IFRS. Hence, we might expect less overall financial reporting diversity in Australia
and the UK relative to some other EU countries which have tended to exhibit a high degree of
Given the importance of IFRS to the IASB’s mission of reducing intra-country financial reporting
diversity, Jones, S. and Finley, A. (2011) based on a sample of 81,560 firm years, examined whether
the mandatory IFRS regime has led to any significant reductions in overall financial reporting
Financial reporting diversity according to them is proxy by the variability of several balance sheets,
income statement and cash flow statement ratios measured over the pre-IFRS and post-IFRS periods.
Variability is measured by the coefficient of variation (CV), a scale neutral measure of dispersion of a
probability distribution. This measure avoids many of the methodological problems associated with
index techniques. Notwithstanding some mixed findings, the group mean comparisons and multiple
regression results indicate some statistically significant reductions in the variability of ratio measures
in the post-IFRS period, even after controlling for factors such as firm size, industry and adoption
status (whether a country is an IFRS adopter or not). While the results should be viewed as
preliminary, they provide some tentative support for IASB’s current policy direction towards global
accounting
standards convergence (for instance, the IASB–FASB convergence project). The results also
have implications for other countries contemplating a shift to IFRS, such as the United
States and several Asian nations, including Japan and India. A useful direction for future
research is to determine whether the same results hold using a more extensive post-IFRS
sample.
This study examines three specific hypotheses which are tested using EU and Australian financial
statement data prepared on (i) an IFRS reporting basis and (ii) on the basis of each country’s local or
domestic accounting standards prior to the formal introduction of IFRS. Financial statement data
comprised key financial ratios extracted from reporting periods both before and after the adoption of
IFRS. The null hypotheses of the study are formally set out as follows:
Hypothesis 1: There are no significant reductions in financial reporting diversity among IFRS
Hypothesis 2: There are no significant reductions in financial reporting diversity among IFRS
adopting countries at the industry level post the introduction of IFRS, ceteris paribus.
Hypothesis 3: There are no significant reductions in financial reporting diversity among larger versus
A limitation of this study is that there are no controls for EU companies adopting IFRS prior to 2005.
For instance, many German companies had voluntarily adopted IFRS prior to 2005.
Notwithstanding some mixed results and confounding observations, they conclude there is sufficient
evidence overall to reject the null hypotheses established in their study that the introduction of IFRS
has had no impact on financial reporting diversity at the intra-country or intra-industry level, nor
the study should only be viewed as preliminary, as IFRS had only recently been introduced to member
nations of the EU and Australia at the date of the study (with 2006 as the first year of reporting for
companies with non-December financial end year dates), there had only a limited set of post-IFRS
observations to base their analysis on. An updated longitudinal study incorporating a greater number
of post-IFRS reporting observations will provide an interesting point of contrast with the current
results.
Furthermore, different methodologies could be used to examine the extent of global accounting
convergence. Notwithstanding certain limitations associated with indexing techniques identified in the
literature, it would be interesting to see whether previous studies which have used such techniques
would yield different results when replicated on post-IFRS data, now that the adoption of IFRS is
Finally, the results tend to provide some tentative support for IASB’s current policy direction towards
global accounting standards convergence (for instance, the IASB–FASB convergence project, also
known as the Norfolk agreement). The results may also have some positive implications for other
countries contemplating a shift to IFRS, such as the United States and several Asian , and African
nations, including Japan, India and Nigeria, if the motivation for adopting IFRS is an expectation that
PRACTICE IN NIGERIA
The usage of IFRS is expected to be domesticated in each member country so that it could be
put to use. In all the continent of the world, from Europe to Asia, to Africa, to Australia hands
have been of deck to ensure compliance to the worldwide standards. In Nigeria, we are not
left behind; local adoption committee was set up in 2010 to work out modalities of
domesticating IFRS in the country. The committee report was as contained in “the Report of
the Committee on Road Map to the Adoption of International Financial Reporting Standards
Nigeria. This report also outlines specific milestones that, if realized, could lead to the
adoption of IFRS in three phases commencing with Public Listed Entities and Significant
Public Interest Entities in Nigeria by 2012, followed by other Public interest Entities in 2013
and Small and Medium-sized Entities in 2014. This Roadmap discusses various areas for
report contains recommendation for the amendments of various laws and regulations that
have one provision or the other impacting on financial reporting such as Companies and
Allied Matters Act 1990, Banks and Other Financial Institutions Act 1991, Investments and
Securities Act 2007 etc and to ensure uniformity and remove conflicts and ambiguity. The
report also recommends the passage and signing into law of the Financial Reporting Council
Bill which has since been passed to law now been referred to as Financial Reporting Council
of Nigeria Act, 2011. The report also recommended adequate capacity for the regulations,
In Nigeria, all the major sectors of the economy have started implementing the standard to
comply with what is obtainable anywhere in the world. Since 2009, the regulators of financial
compete globally. Financial institutions and Insurance sector are among institutions that are
complying fully with due diligence, international accounting requirements, full disclosure of
their financials and global comparability for stakeholders. First Bank Nigeria Plc (FBN)
financial statement so also are banks like Guaranty Trust Bank Plc and Access Bank Plc who
currently use IFRS for the presentation of their financial statements. According to First Bank
of Nigeria Annual Report and Accounts for 2011, the notes to the financial statements under
the Statement of significant accounting policies under the basis of consolidation under
Subsidiaries the annual reports states “The acquisition method is used to account for business
combinations. The cost of an acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at the date of exchange, plus
costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair
values at acquisition date, irrespective of the extent of any non-controlling interest.” The fair
value measurement is been put to use as recommended by the IFRS. Also, Insurance sector is
not left behind as stated in the Annual Report of PRESTIGE ASSURANCE PLC notes to
Financial Statements. The report stated that; the financial statements have been prepared in
measurement, the financial statements have been prepared on the historical cost basis except
as detailed below:
i). financial instruments at fair value through profit or loss are measured at fair value,
ii) available-for-sale financial assets are measured at fair value in compliance to the
worldwide standard.
From the above analysis, we can see that corporate organisation in Nigeria are complying
with the adoption and most especially the roadmap adoption as initiated by the committee
recommendation.
FIRS (Establishment) Act 2007, the tax implications of the adoption of the Standard. All
gains and losses that may arise from fair value measurement shall be disregarded for tax
purposes.