The Impact Of Ifrs Adoption And Banking Reform On Earning Management

The Impact Of Ifrs Adoption And Banking Reform On Earning Management

 Chapter One

A

Background of the Study

Globalization of capital requests requires a unified global account, reporting and exposure set of norms. As a result of adding volume of cross border capital overflows and the growing number of foreign direct investments via combinations and accessions in the globalization period, the need for the adjustment of different practices in account and the acceptance of worldwide norms has arisen. This worldwide standard is transnational fiscal reporting norms( IFRS). Although, there has been series of contentions as regarding the impact of this standard on the quality of fiscal statements, but this study will give a clear understanding of their relationship.

International Financial Reporting norms( IFRS) is a set of principle – grounded issued and established by International Accounting norms Board( IASB) and generally accepted by different countries around the world to insure community and translucency in account practice( Desoky and Mousa, 2014). The establishment of similar norms by IASB aimed at achieving adjustment and creation of fiscal practices to insure thickness in reporting format across countries which should minimize cost of recycling fiscal information to investors and perfecting effectiveness of capital requests( Wen et al, 2011). lately around the world further than 120 countries and reporting authorities needed domestic listed companies to prepare their fiscal statements in agreement with IFRS( Mousa and Desoky, 2014). The relinquishment and perpetration of IFRS has been one of the most important events in account history of different countries around the world which induce significant changes in the fiscal practices( Kousenidis, et al, 2010). still, changes are set up to vary among countries and reported to be more serious in countries that had a law- law account system( Ball etal., 2000). Before perpetration of IFRS, was account system affected by severe government and legalistic influences which is in discrepancy with a common- law account system countries like North America( Kousenidis, et al, 2010). In a common law account system there’s a proper description of IFRS and account is substantially affected by the request interpreters( Ball etal., 2000). With growing acceptance of IFRS by different countries around the world, numerous experimenters aimed to find out empirically whether the new account norms has bettered the quality of fiscal statements that’s reported to the druggies. likewise, banks ’ capability to engender profitable growth and development depends on the health, soundness and stability of the system. The need for a strong, dependable and feasible banking system is underlined by the fact that the assiduity is one of the many sectors in which the shareholders ’ fund is only a small proportion of the arrears of the enterprise. It is, thus, not surprising that the banking assiduity is one of the most regulated sectors in any frugality. It’s against this background that the Central Bank of Nigeria, in the maiden address of its current Governor,Prof. Charles Soludo, outlined the first phase of its banking sector reforms designed to insure a diversified, strong and dependable banking assiduity. The primary ideal of the reforms is to guarantee an effective and sound fiscal system. The reforms are designed to enable the banking system develop the needed adaptability to support the profitable development of the nation by efficiently performing its functions as the fulcrum of fiscal intermediation( Lemo, 2005). therefore, the reforms were to insure the safety of depositors ’ plutocrat, position banks to play active experimental places in the Nigerian frugality, and come major players in thesub-regional, indigenous and global fiscal requests. The crucial rudiments of the 13- point reform programme include minimal capital base of N25 billion with a deadline of 31st December, 2005; connection of banking institutions through combinations and accessions; Gradational pullout of public sector finances from banks, beginning from July, 2004; Relinquishment of a threat- concentrated and rule- grounded nonsupervisory frame; Zero forbearance for weak commercial governance, misconduct and lack of translucency.

On the other hand Earnings operation has been an issue of nonstop concern for several times for nonsupervisory bodies and account interpreters. For illustration, Hadani, Goranova and Khan( 2011) argue that earnings operation increases information asymmetry and negatively impacts the quality of fiscal reports. Earnings operation is said to be the reasons for low quality of reported information. It’s the choice of a director among counting programs which allow achieving some specific objects( Scott, 2003). directors use flexibilities within the account standard to choose account styles, programs and estimates in reporting process to reflect establishment’s future prospect( Shehu, 2013). therefore the very nature of counting supplements gives directors a great deal of discretion in determining the earnings in any given period. directors can apply legal and permitted account styles or practices which inescapably impacting negatively on earnings quality Presently, numerous countries have replaced public account norms by IFRS in order to make original account system more transparent, dependable, applicable, accessible and more importantly to enhance fiscal reporting quality. still, the process of IFRS perpetration varies significantly from country to country due to political, artistic, profitable, legal and institutional factors. Nigeria and numerous developing countries are characterized by weak institutions and unpredictable profitable and political terrain which aren’t veritably conducive for effective perpetration of IFRS( Tanko, 2012). It’s to this regard that study examines the impact of IFRS relinquishment and banking reform on earning operation using first bank as the case study.

Statement Of The Problem

The Nigerian banking sector witnessed dramatic growthpost-consolidation. still, neither the assiduity nor the controllers were sufficiently set to sustain and cover the sector’s explosive growth. Prevailing sentiment and profitable prevailing station all encouraged this rapid-fire growth, creating a eyeless spot to the pitfalls erecting up in the system. Empirical account inquiries have been conducted to examine the impact of IFRS relinquishment and banking reform on earning operation and determine the extent to which IFRS give fresh applicable information and ameliorate the information content of fiscal statement prepared in line with these norms. previous studies have so far presented mixed results as some studies set up an enhancement in fiscal reporting quality after IFRS relinquishment and extensively support the thesis that earnings operation declined vastly after IFRS relinquishment( Cai, Courtesney & Rahman, 2008; Aussenegg, Inwinkl & Schneider, 2008).

Aim And Objects Of Study

The main end of the exploration work is to determine the impact of IFRS relinquishment and banking reform on earning operation. Other specific objects of the study are

1) To examine the impact of International Financial Reporting norms IFRS on the rate of reform in First Bank Plc Nigeria.

2) To examine the benefits of International Financial Reporting norms IFRS in First Bank Plc Nig.

3) To dissect the relationship between International Financial Reporting norms IFRS and earning operation in first bank NigeriaPlc.

Exploration Question

The study came up with exploration questions so as to ascertain the over stated objects of the study. The exploration questions for the study are

1) What’s the impact of International Financial Reporting norms IFRS on the rate of reform in First Bank Plc Nigeria?

2) What are the benefits of International Financial Reporting norms IFRS in First Bank Plc Nig?

3) What’s the relationship between International Financial Reporting norms IFRS and earning operation in first bank Nigeria Plc?

Statement Of Research Hypothesis

thesis 1

H0 there’s no significant relationship between International Financial Reporting norms IFRS and earning operation in first bank Nigeria Plc

H1 there’s significant relationship between International Financial Reporting norms IFRS and earning operation in first bank Nigeria Plc

thesis 2

H0 International Financial Reporting norms IFRS has no impact on the rate of reform in First Bank Plc Nigeria

H1 International Financial Reporting norms IFRS has impact on the rate of reform in First Bank Plc Nigeria

Significance Of Study

The following handed a functional significance for this study

1) The findings from this study will be veritably useful for business directors particularly banks in the understanding of the relationship between transnational fiscal reporting norms IFRS, Banking reforms and earning operation.

2) This exploration will be a donation to the body of literature in the area of transnational fiscal reporting norms IFRS and Banking reforms and earning operation in Nigerian banks, thereby constituting the empirical literature for unborn exploration in the subject area.

Compass Of The Study

This study is limited to First Banks Plc in Nigeria. It’ll also cover the relationship between transnational fiscal reporting norms IFRS, banking reforms and earning operation in Nigerian banks.

Limitation Of Study

fiscal constraint-inadequate fund tends to stymie the effectiveness of the experimenter in sourcing for the applicable accoutrements , literature or information and in the process of data collection( internet, questionnaire and interview).

Time constraint- The experimenter will contemporaneously engage in this study with other academic work. This accordingly will cut down on the time devoted for the exploration work.

Description Of Terms

BANK REFORM make changes in first bank in order to ameliorate the performance.

References

Ball,R., & Brown,P.( 1968). An empirical evaluation of account income figures. Journal of Accounting Research, 6( 2), 159- 178.

Desoky,A.M., and Mousa,G.A.( 2014). The value applicability and pungency of IFRS counting information The case of GCC stock requests. International Journal of Accounting and Financial Reporting, 4( 2)

Kousenidis,D., Ladas,A. and Negakis,C.( 2010). Value applicability of counting Information in the preandpost-IFRS accounti