Examination On The Extent Of Compliance To International Financial Reporting Standard (A Case Study Of Wema Bank Plc)

Examination On The Extent Of Compliance To International Financial Reporting Standard (A Case Study Of Wema Bank Plc)

Second Part

Introduction

1.1Context of the investigation

The fact that users rely on financial reports when evaluating economic decisions, especially financial reports issued by public companies, necessitated the establishment of standards to regulate the preparation of such statements in order to increase their credibility. Multiple nations have devised accounting standards to regulate accounting systems tailored to their respective environments. Over time, the enterprises have grown and expanded across international borders. Additionally, corporate capital requirements have increased, with new capital originating from international markets. Diverse information requirements of consumers from national and international sources, as well as difficulties in the comparability of degrees as a result of varying standards, have emerged. Due to the increasing integration of global markets, businesses around the globe must labor to match the activities of multinational corporations (Beier, 2008). According to Tafara (2008), stakeholders and investors are no longer restricted in their ability to select companies and investment opportunities for the purpose of assembling the finest portfolio.

Choi and Meek (2005) assert that a higher level of comparability and quality of financial statements is necessary as international audiences become more familiar with and ignorant of the various national accounting standards by which financial statements are prepared. If investors and stakeholders are unable to obtain a reasonable and transparent perspective of the selected companies, additional expenses in the form of potential capital losses or investment opportunities will result in a lack of confidence in the companies.

As the forces of globalization encourage an increasing number of nations to open their doors to foreign investment and as companies expand beyond their borders, public and private companies increasingly recognize the advantages of globalization. Globally acknowledged, stringent accounting standards support a uniform financial reporting system.

Harmonization initiatives in 1973 led to the establishment of the International Accounting Standards Committee (IASC), which published the International Accounting Standards (IAS) series of standards. Since April 2001, the International Accounting Standards Board (IASB) has assumed the responsibilities of its predecessor, the International Accounting Standards Committee (IASC), in defining accounting standards in order to make them obligatory for all members. The IASB has incorporated all IASC-issued standards, which are still referred to as IAS. The new standards, however, would be published as a series known as International Financial Reporting Standards (IFRS). With the IASB’s development of IFRSs, the globally recognized and long-awaited accounting standard has been a success, with more than 120 countries converting their standards into IFRS (Institute of Chartered Accountants England and Wales, 2010).

1.2 Problem statement

Nigeria replaced its previous national accounting standards (ANAN) with the International Financial Reporting Standards (IFRS) on January 1, 2007 in an effort to accelerate private sector growth. On January 23, 2007, the Board of Directors of the Institute of Chartered Accountants of Nigeria (ICAN) approved its adoption, obligating all listed companies, public bodies, banks, and insurance companies to adopt IFRS by December 31, 2007, among other entities. Entities have been granted an additional two-year transition period (United Nations, 2007). Nigeria is currently one of 15 African nations, along with Botswana, Egypt, Ethiopia, Kenya, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Sierra Leone, South Africa, Tanzania, Swaziland, and Uganda. IFRS (Zori 2011, Price Waterhouse 2010).

However, empirical studies conducted by Street and Gray (2001) and Glaum and Street (2003) have revealed that companies frequently claim to comply with IFRS in their annual reports, despite the fact that there are material differences to IFRS. Similarly, the International Federation of Accountants (IFAC) discovered that accountants corroborate IAS compliance even when accounting policies and ratings indicate otherwise (Cairns, 1997). In this context, the study sought to ascertain the degree of compliance with IFRS for all companies listed on the Nigerian Stock Exchange (NSE), as well as to identify the drivers of IFRS compliance and the differences between them.

1.3 Objective of the investigation

The purpose of this study is to assess WEMA Bank PLC’s compliance with International Financial Reporting Standards. In particular, the study will;

Examine the extent to which WEMA bank plc complies with IFRS.

to identify the factors that affect IFRSs compliance

Examine whether there are distinctions between industries in terms of their compliance with IFRSs.

1.4 Importance of the research

The purpose of the study is to assist the public sector in adopting a holistic approach to accounting standards and IFRS. The study will also be of interest to public universities, higher education institutions, research institutes, and individual researchers with an interest in accounting standards, who will use the study’s findings for future studies. This study will encourage researchers to determine the sector’s efficacy and efficiency. Individuals in the banking industry will be better able to comprehend their position relative to the financial report standard as a result of this study.

Research premise

The research hypothesis is:

HO1: WEMA bank plc is not in compliance with IFRS

HO2: There are no substantial differences between industries in terms of their IFRS compliance.

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Limitations and Scope of the Study

The research scope is restricted The examination of WEMA Bank PLC’s compliance with International Financial Reporting Standards. Time and financial constraints constrained the research.

Definition of Fundamental Terms

Corporate Size: Regardless of how it is measured (e.g., total assets, sales turnover, and number of shares), a firm’s size is a variable that can reasonably explain the quality of its disclosures.

Profitability is the extent to which a business or activity generates profit or monetary benefit.

The ratio of a company’s loan capital (debt) to the value of its common shares (equity); gearing; leverage.