This study started by reviewing the financial reporting environment in Nigeria. It progressed by reviewing relevant literature on international accounting standards and the development and adoption of IFRS. Related theories were also reviewed. The research design and methodology for the study were determined consistent with data availability. Thus, a survey questionnaire was deemed appropriate for this study. A preliminary analysis of the collected data was carried out based on chi-square test, t-test and factor analysis. Finally, the research hypotheses were tested to show the impacts of the factors on IFRS adoption. A detailed summary of the research process is discussed as follows.
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Chapter 2 reviewed the Nigerian financial reporting environment. It was identified that the Nigerian accounting system has existed since 1957 and consists of a set of accounting standards known as statements of accounting standards. The accounting standards developed by the FRC are required to be complied with under the CAMA 2004. There was a setback in the enforcement and adoption of accounting standards among Nigerian companies. This is attributed to the weak enforcement mechanism and multiplicity of laws in Nigeria. Further, there was a lack of continuous improvement in the accounting standards from 1957 – 2010 which led to IFRS adoption.
Following, the World Bank (2004) recommendations, IFRS was implemented in Nigeria with an effective date from January 2012. Different challenges were reported following the adoption,
for example, companies’ resistance to adopt IFRS requirements, different regulatory requirements contrary to IFRS, the lack of IFRS knowledge and incompatibility with industry
specific business activities and company’s unwillingness to adopt the IFRS requirements.
Media reports showed most of the companies are expected to adopt IFRS but resisted conforming to the FRC directive. The reasons for the resistance include preparers of financial statements’ concerns about unintended consequences of applying IFRS requirements in preparing financial statements and inconsistency with industry business activities. Other reasons for non-adoption include difficulties in applying IFRS for measurement, recognition and disclosure of accounting items (Ikpefan & Akande, 2012; Odia & Ogiedu, 2013; Uwadiae, 2012a, 2012b, 2013). However, these challenges have not been widely researched. Consequently, there was a limited understanding of what inhibits IFRS adoption in Nigeria. Thus, this study identified these challenges more explicitly.
Chapter 3 reviewed the related literature and theories. The literature review identified characteristic inconsistencies in the arguments for and against IFRS adoption. While some scholars support IFRS adoption for transparency, legitimacy, reliability and stewardship in financial reporting, others debate against IFRS adoption on the basis of cultural differences, difficulties in IFRS applications and industry specific accounting information requirements.
This study identified that the challenges in IFRS adoption are inconsistent throughout the literature. This means there are no clearly identified reasons companies adopt or resist adopting IFRS. Further, the literature revealed some concerns companies are likely to face in
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IFRS adoption. These include practical difficulties, industries’ compatibility with IFRS accounting principles and companies’ cultural factors influencing accounting values.
Despite the volume of research investigating the challenges companies face in IFRS adoption, studies on the challenges in IFRS adoption in the context of Nigerian companies are limited. Following the increase in IFRS adoption, different studies have attempted to identify the associated challenges. However, the challenges are inexhaustible and different around IFRS jurisdictions.
From a theoretical perspective, there are several theories explaining the adoption of accounting standards. Chapter 3 discussed the related theories that explained how
companies’ respond to accounting standards differently. Based on the theories and previous studies, a conceptual model was developed centred on cultural factors, industry type and practical difficulties to examine the challenges in IFRS adoption.
The study methodology and data were discussed in Chapter 4. A self-administered survey questionnaire was employed to collect data from financial statement preparers about their experiences in IFRS adoption. The survey instrument covers accounting practice, perceptions of IFRS adoption in Nigeria, practical difficulties in adopting IFRS, companies’ characteristics
and demographic information of the employees who completed the survey questionnaire.
The questionnaires were delivered and collected by five survey assistants. The companies’
senior accountants and CFOs who gave consent to participate in the research completed the questionnaires on behalf of the companies.
Based on time and budget constraints and practical difficulties in obtaining a complete mailing list of the target population from FRC’s Directorate of Accounting Standards Private Sector, the study used a convenience sampling method to select the sampled companies. The sample consisted of companies in Abuja, Benin City and Lagos Nigeria. These are some of the largest cities in Nigeria and where the majority of Nigerian businesses are located, except for Benin City which has fewer companies.
The respondents who completed the survey questionnaires had different educational
qualifications. A Bachelor’s degree was the most common qualification held by the
respondents followed by a Higher National Diploma. The majority of the respondents that completed the survey questionnaire were chief financial officers of the companies with least
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a Bachelor’s degree qualification. Most of the respondents were between 30 to 40 years of age. Following the data collection, descriptive statistics were used to describe the characteristics of the companies in Chapter 5. The chi-square tests and independent t-tests were used to test the differences and similarities between IFRS adopters and non-adopters and the probability that the sample companies experienced the same challenges. In addition, EFA was employed to identify the underlying dimensions in explaining the inter-relationships
among the companies’ accounting values and practical difficulties in adopting IFRS. The study
used EFA to reduce the items from the survey instrument into a smaller set of factors as explanatory variables. Logistic regression was used to estimate how the explanatory variables influenced the preparers of financial statements’ decisions towards IFRS adoption and to what extent they affected IFRS adoption successes.