THE USEFULNESS OF INTERNATIONAL FINANCIAL REPORTING STANDARD IN THE PREPARATION OF FINANCIAL STATEMENT ( A CASE STUDY OF FIRST CITY MONUMENT BANK)

CHAPTER ONE

1.0                           INTRODUCTION

International financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are consequence  of growing international shareholding and trade and are particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. The rules to be followed by accountants to maintain books of accounts which is comparable, understandable, reliable and relevant as per the users internal or external.

IFRS, with the exception of IAS 29. Financial Reporting in Hyper inflationary Economies and IFRIC 7 apllying the restatement approach under eIAS 29, are authorized in terms of the historical cost paradigm. IAS 29 and IFRIC7 are authorized in terms of the units of constant purchasing power paradigm.

1.1   Background of the Study

IFRS began as an attempt to harmonize accounting across the European Union but the value of harmonization quickly made the concept attractive around the world. However, it has been debated whether or not de facto harmonization has occurred. Standard that were issued by IASC (The predecessor of IASB) and are still within use today go by the name international Accounting Standard (IAS), while standards issued by IASB are called IFRS. IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On 1 April 2001, the new international Accounting Standard Board (IASIB), took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting, the new Board adopted existing IAS and standing interpretations committee  standards (SICS). The IASIB has continued to develop standards calling the new standards “International Financial Reporting Standards”.

In the absence of a standard or an interpretation that specifically applies to a transaction management must use its judgment in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgment, IAS 8.11 requires management to consider the definitions, recognition, criteria and measurement concept for assets, liabilities, income and expenses in the framework.

CRITICISMS OF IFRS

1. That they are not being adopted is U.S (See GAAP)
2. A number of criticisms from France and (5) that IAS 29 financial reporting in Hyperflationary Economies had no positive effect at all during 6 years in Zimbabwe’s hypenflationary economy. The IASB offered responses to the first two criticism, but has offered no response to the last criticism while IAS 29 is currently (march 2014) being implemented in its original ineffective form in venezuela and Belarus.

1.2   Statement of the Problem

It is a necessity for every corporate, private and public organizations to have a consistent and functional ways of reporting the financial activities of that organization. However, many public, private and corporate businesses in Nigeria lacks the tenacity of using an intermedially standardized financial accounting system in reporting any transaction or managing preparing the company’s financial statement that is easy and direct. This shared problem eventually has affected globalization and economic growth in business in Nigeria

1.3   Objectives of the Study

The objective of this research work is to determine the usefulness of international Financial Reporting Standards (IFRS) in the preparation of financial statement. Hence the specific objectives includes;

1. To ascertain the role of IFRS in reconciling the locally prepared financial statement with the foreign standard.
2. To determine if the IFRS has so far revealed a reliable accounting standard for corporations of the world to adopt.

iii.    To ascertain if the adoption of the IFRS in financial statement discloses the actual financial position of an entity.

1. To determine if the IFRS has in any way led to the decrease of frauds in corporation entities.
2. To make recommendation based on the finding

1.4   Research Question

1. Does IFRS promote the globalization of business?
2. Is IFRS important for the economic growth in Nigeria?
3. Can the use of the common standards in the preparation of public company financial statement make it easier to compare the financial result of reporting entities from different countries?

1.5   Significance of The Study

Against the backdrop of the mediocrity observed in the auditors performance and the consequences on financial reporting prospects.

The major significance of this work It is excepted that the study will save as a literature review to other students.

–       Most importantly, it is envisaged that it should be useful to public policy analyst, auditors accountants, particularly for management consumption etc.

–       It will be of immense help to future researchers on the usefulness of IFRs in financial statement preparation.

–       It is also be pertinent to the researcher for the award of national diploma in accounting.

1.6   Scope/Limitation Of The Study

The research work covers a comprehensive analysis of the usefulness of the IFRS in the preparation of financial statement. The research will also provide a brief history or origin of international financial reporting standards (IFRS). This work is by no means exhaustive but useful attempts to penetrate the core of the issue which have been made. The researcher encountered many difficulties in the process of collecting data for her research. These problems invariably formed the basis for limitation of the study.

Firstly, time constraint affected a comprehension review of related literature on the subject after the study gathering of material, textbooks, journals etc for the review of literature were time consuming. The researcher being a student has other courses to cover and thus had to apportion her time the damage of other courses.

Secondly, the proximally of related literature material also posed a problem. The researcher was impeded by necessary textbooks, magazine and journals for literature review, furthermore, the respondents offered their downside to the study, human beings have never been easy to deal with especially when human behaviour are unpredictable. Some data and questionnaires were bluntly refused by the respondents. Finally, the research was wholly sponsored by the researcher, which was based on the little money they could save. All these limitations, limited the validity of the findings and conclusion, the research would have been more retained without these constraints.

1.7   Definition Of Terms

IFRS International Financial Reporting Standards;

IFRS:        Is a set of accounting standard developed by an independent, not –for-profit organization called the international accounting board- With the goal of providing global framework for how public companies prepare and disclose their financial statement

Financial statement:         Financial statements are a structured representation of the financial position and financial performance of an entity.

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