The significance of accounting standards (SAS) in the compilation of financial statements was investigated in this research project, which focused on Guinness Nig Plc in Lagos. The financial statement contained in the annual report to shareholders (owners) and potential investors is the most typical report from external use.
These financial statements are created to confirm that they comply with generally accepted accounting principles, which have evolved over time or have been deemed acceptable by a rule-making body’s decree.
Accounting standards are the consequence of a mostly political process.
The government prescribes the procedures of accounting profession through the Securities and Exchange Commission (SEC), and Nigeria accounting standards bodies provide statements of accounting standards as a guide for generating financial statements.
The researcher investigated the relevance of the statement published by the accounting profession’s organ (NASB) and how they are being followed, as well as its accomplishments and issues, and theories. However, the study’s findings revealed that accounting’s standard application in compiling financial statements has come to the conclusion that it contributes significantly not only to Guinness Nig PIc, but also to the nation’s economy as a whole.
Background to the Study
Accounting standards are designed to make it easier to provide financial information about companies so that investors, analysts, creditors, and the companies themselves may make informed decisions regarding resource allocation. Accounting standards are primarily concerned with disclosure and are, in many ways, at the heart of market efficiency. While accounting standards aid financial statement preparers by providing a framework within which to produce the statements, their primary purpose is to assist users of the statements in making meaningful evaluations about an entity’s financial status. Financial statements are used by a wide range of people, from directors to investors to credit rating agencies.
Effective financial reporting, which is critical for investor trust, can only be achieved if it is based on accurate and timely data.
Accounting standards are becoming increasingly important as legislation leaves the details of financial reporting requirements to be filled in by accounting standards.
Accounting standards help individual corporate entities run more efficiently on a day-to-day basis and contribute to the smooth operation of capital markets.
Accounting standards strengthen individual commercial enterprises’ and their managements’ accountability to investors and creditors at the firm level. Accounting standards help a company entity’s management optimize the wealth of the entity by fostering accurate reporting. Find out how to set up effective and efficient corporate governance arrangements.
Accounting standards, on a larger scale, are essential for providing accurate, transparent, and dependable information to the market as a whole. In this sense, a well-informed market is more likely to be efficient.
Accounting standards that result in the provision of accurate and comparable information about a company entity’s genuine financial performance and position boost investor confidence and market integrity, lowering capital costs across the economy. Maintaining and building a sophisticated domestic capital market requires public confidence in the integrity of the financial reporting framework.
Historical Background of the Study
The dispute over International Accounting has a long history.
The focus of the Standard Commission’s standards has been on qualitative issues. At times, the International Accounting Standards Commission has been viewed as:
inferior in terms of underlying accounting practices; incomplete and unadoptable without major backing from national standards and regulatory agencies; unable to achieve the same level of investor protection as Australia already does;
Alternative accounting procedures have been allowed to be employed, diminishing the comparability of financial information; and have allowed the use of too many options in the compilation of financial reports; and are incomplete, with gaps in the standards.
In view of the foregoing, the International Accounting Standard Commission agreed to a new work program in 1995 to address international standards critiques, particularly gaps in coverage. By March 1998, the work program seeks to finish a core set of standards and re-examine a large number of current standards. Cross-border services and listings are the focus of the core set of standards being established.
International has stated that it will withhold its endorsement of International Accounting Standard Commission standards until a core set of acceptable standards has been established.
In this context, the International Accounting Standard Commission has been given a deadline of the end of 1998.
In the United States, it’s worth noting that the US Congress recently passed the National Capital Efficiency Act of 1996, which focuses on the accounting issues that issuers face when raising capital across international borders. The Securities and Exchange Commission (SEC) of the United States will report to Congress later this year on the progress of accounting standard development.
Development of accounting rules that improve the efficiency, growth, and international competitiveness of Australian businesses while maintaining investor confidence;
The Australian Accounting Standard Board (AASBcomposition )’s and funding, as well as the need for more industry and user participation;
The applicability and usefulness of existing accounting standards to current circumstances.
The extent to which accounting standards should be strictly prescribed, as well as whether individual companies should be allowed or required to determine the level and type of disclosure that is appropriate for them; and whether Australia should continue to develop its own set of standards, or whether international standards should be used as a basis and adapted to Australian conditions as needed.
This paper suggests an accounting standard-setting structure for Australia that entails the participation and support of all financial reporting stakeholders. The reorganization of the existing regime raises a number of concerns, including the role of accounting standards, the institutional arrangements for standard creation in Australia, and the funding of accounting standard setting.
Effective financial reporting, which is critical for investor trust, can only be achieved if it is based on accurate and timely data. While Australian accounting rules have been criticized for being overly thorough and complex at times, this does not always imply that they are fundamentally incorrect. Business and international standard setters have told the government that the form and content of Australian accounting standards are largely similar to those in other nations with sophisticated capital markets.
As a result, a wholesale or fundamental change in the way standards are written would be improper. However, better targeting and design of specific standards may be possible.
The accounting standards that the financial reporting framework is founded on, like financial reporting, must be dynamic and sensitive to the needs of users. As a result, the question of how to ensure that accounting standards meet the needs of users who are increasingly demanding greater sophistication and reliability in financial reports arises.
The legislation that establishes the Australian Accounting Standard Board, the Australian Securities Commission Act 1989, does not provide any indication to the Australian Accounting Standard Board as to the purposes of or the objectives to be achieved by, the accounting standards it is required to prepare. In this case, It would be preferable if the standard-setter was given more direction on what accounting standards should aim to achieve. While clarity of accounting standards’ objectives does not guarantee the establishment of high-quality and relevant standards, it can help get us there. In light of the foregoing, it should be explicitly stated, either in the standard setter’s charter or in the legislation under which it is established, that in designing accounting standards, the standard setter should seek to ensure that compliance with accounting standards leads to the production of relevant, reliable, neutral, and comparable financial information for users.
Accounting standards are getting more prescriptive, mainly due to a trend toward interpreting them from a purely legal rather than a business standpoint. In this sense, it appears that a vicious spiral is forming since financial statement preparers are increasingly relying on adherence to the black letter of the standards to defend themselves legally, rather than adopting the standards’ spirit.
To solve this problem, legislation might clearly state that accounting rules should be read from a commercial perspective rather than a simply literal 0″ legal one. From a commercial standpoint, it is planned that the standards’ aims and what is usually considered in the industry be given more weight.
Statement of Problem
Following the identification of the research study’s context, it is required to state the problem:
(1) The issue of the impact of accounting standards on an organization’s reputation.
(2) The issue of the importance of accounting standards in terms of an organization’s growth and development.
(3) The issue of the impact of accounting standard significance on the formation of competitive advantages.
Objective of the Study
The study’s goal is to do research on the issues under investigation in order to recommend a plan of action.
(1) To determine the impact of accounting standard significance on the formation of competitive advantages.
(2) To determine the impact of accounting standard significance on the establishment of competitive advantage.
(3) To determine the impact of accounting standard significance on an organization’s profitability level.
(4) To determine the extent to which the significance of accounting standards improves the organization’s business reputation.
Significance of the Study
The following are some of the study’s different implications:
It should be stated explicitly, either in the standard setter’s charter or in the legislation under which the standards are established, that the standard setter should seek to ensure that the standards lead to the production of:
relevant, trustworthy, unbiased, and comparative
Financial data for those who read financial statements.
In the establishment of each accounting standard, the standard setter should conduct a cost-benefit analysis. When doing a cost-benefit analysis, examine whether the proposed standard is appropriate for all entities required by law to compile financial statements in line with accounting standards, or if it should only apply to a certain type of entities.
The following are some of the most important research questions:
I To what extent has the importance of accounting standards benefited the organization’s profitability?
(ii) What impact does the importance of accounting standards have on the organization’s business reputation?
(iii) What role does accounting play in the development of competitive advantages in the organization?
The following is a list of the research hypothesis:
The First Hypothesis
Ho:’ The organization’s profitability does not improve as a result of the accounting standard.
Hi: Accounting standards help businesses increase their profitability.
Hypothesis No. 2
Ho:Accounting standards do not help an organization’s corporate reputation.
Hi: The organization’s corporate reputation is enhanced by accounting standards.
Ho: Accounting standards do not give the company a competitive advantage.
Hi: Accounting standard create competitive advantages in the organization.
Scope and Limitation of Study
The scope and depth of this research will be limited to the bank in question, Guinness Nigeria Ltd, which operates in the Lagos area. Employees, consumers or clients, competitors, and vendors will all be considered part of the business environment in this example, whereas other variables such as the economic, social, and political environment will be excluded from the study area.
The purpose of this study is to conduct a descriptive and empirical investigation of the efficient and effective relevance of accounting standards in organizations, with a focus on Guinness Nigeria plc.
The study’s limitations will include time constraints and clients’ incapacity to submit relevant information.
Definition of Terms
This section of the chapter will concentrate on providing a better grasp of the terms used by the author in the creation of these chapters.
Accounting is the art of recording transactions in the best possible way to allow the reader to make judgments / draw conclusions, and it is critical that there are clear norms in this regard. Accounting policies are the common name for these guidelines. Accounting rules’ complexities allowed businesses to change their accounting principles to their advantage. It was impossible to make comparisons because of this. Standards had to be created by recognized accounting organisations in order to avoid the above and to have a consistent accounting principle. Accounting was made possible as a result of this.
Accounting Policies Disclosure: Accounting Policies refer to certain accounting principles and the process by which those principles are applied in the creation and presentation of financial statements by businesses.
The goal of this standard is to establish a method for calculating the cost of inventories / stock, as well as to calculate the value of closing stock / inventory at which the inventory is to be displayed in the balance sheet until it is sold and revenue is recognized.
Cash Flow Statements: A cash flow statement is a financial statement that provides additional information to the user. This statement depicts the inflow and outflow of cash. This statement evaluates the company’s ability to create and use cash. This statement is one of the tools that can be used.
Changes in Accounting Policies, Prior Period Items, and Net Profit or Loss for the Period: The goal of this accounting standard is to establish standards for some items in the profit and loss account so that financial statement comparability can be improved.
Depreciation Accounting: It is a measurement of a depreciable asset’s wear and tear, consumption, or other loss of value due to usage and time. Depreciation is the spread of an asset’s entire cost over its usable life.
Construction Contracts: Accounting for long-term construction contracts raises the question of when income should be recorded and how revenue should be measured in the books of a construction contract that begins one year and ends the next year or vice versa.
Revenue Recognition: The standard outlines when revenue should be recognized in the profit and loss account, as well as when it might be postponed in certain circumstances. Gross resources plus interest, dividends, and royalties equal revenue. To put it another way, revenue is a fee charged to customers / clients for things provided.