1.1 Background to the Study: The end product of financial reporting is the preparation and publication of financial statement. A substantial number of alternative postulate, principle assumption and method adopted by a reporting entity in the preparation of financial statement can significantly affect its result of operation and understanding the interpretation of financial reporting in financial statement.The financial statement prepared by the accountants is based on convention that is derived from printable reports and there conventions originate from such concepts as: entity, going concern, periodicity, realization consistency, matching concept, historical cost.
These concepts are fundamental to financial reporting standards and presentation of financial statement, disclosure of fundamental financial concept and acts followed.This is because financial statement are for interest to a variety of users, especially shareholders, the use of financial statement clearly valuable evaluation of a reporting enterprise unless if financial statement clearly disclose the significant financial accounting policies that have been adopted in their preparation.Its is also adopted in recognizing measures and values on item of revenue, expense, gain, loss or any asst or liability.
Financial reporting practice have evolved in response to the verity and complexity of types of enterprise and business transaction, there exist more than one recognized calculating profit, measuring depreciation, valuing inventory.Standard accounting practices require publicly traded companies to follow certain accounting rules when presenting financial statements so that the readers of the statements can easily compare different companies. Private companies are also often required by banks and shareholders, for example, to present information according to their specified rules.
Usually, countries practicing civil law system write standards into law and countries with English common law systems have private organizations to set the rules. There are specialist organizations that can arrange for the set-up of an accounting practice with a franchise business model which can prove successful from the out-set.The accounting standards are developed to ensure a high degree of standardization in the published financial statement. They provide the necessary information about how financial reporting information should be gathered, prepared and presented in order to improve the value of its contents and facilitate through understanding.
1.2 Statement of Problem
Financial accounting as an aspect of the accounting profession is concerned primarily with the Tran writing of financial information to the user who would use it to improve the outcome of their decision process. The financial information are embodied in the financial statement which serves as a means of communicating information to interested parties the obligation and performance of the reporting entity or enterprise in Nigeria system.In preparing and presenting financial statements, the accountants must be guided in such preparation by the standard of the profession to ensure that such financial statement prepared and presented will facilitate a thorough understanding to its user.
1.3 Research Questions
The following research questions are used in the research work.
i. What significant effect does financial accounting standard has on the quality of financial reporting in Nigeria?
ii. How effective is accounting standard in business enterprise?
iii. What are the problems encountered in the application of accounting standard?
1.4 Objectives of the Study
The broad objective of this study is to ascertain the effect of accounting standard on the quality of financial reporting in Nigeria. To following are the sub-objectives;
1. To determine the effect of financial accounting standard on the quality of financial reporting in Nigeria.
2. To ascertain if accounting standard is effective in business enterprise.
3. To ascertain the problems encountered in the application of accounting standard.
1.5 Statement of Hypotheses
The following are the hypotheses of the study;
HO: Financial accounting standard has no significant effect on the quality of financial reporting in Nigeria.
HI: Financial accounting standard has significant effect on the quality of financial reporting in Nigeria.
HO: Accounting reporting standard is ineffective in business enterprise.
HI: Accounting reporting standard is effective in business enterprise.
HO: There are no problems encountered in the application of accounting standard.
HI: There are problems encountered in the application of accounting standard.
1. 6 Significance of the Study
At the end of this research work, one will be able to know the procedures adopted in the preparation of financial statement reporting and the information contained therein.Accounting Users: The relevance of the various concepts and convention in the preparation of financial will be classified. This is based on the fact that an attempt will be made to discover the importance of disclosure of the various concept and convention used in the preparation of financial statement, the understanding and interpretation of which it will greatly affect the decision of users.Future Researchers: the study will broaden the knowledge of the academic community on the importance of accounting standard on the quality of financial statement and their subsequent disclosures.
1.7 Scope of the Study
The scope of this research work is limited to the effect of accounting standards on the quality reporting in Nigeria. In this study, the research covers in depth information gathered in such areas as, the historical development of financial statement, the objective of financial reporting, the various financial reporting standard, postulate the theoretical concept and principles. The time frame of the study is 5 years i.e. 2011 – 2015 (both years inclusive).
1.8 Limitations of the Study
In carrying out this research work, a number of difficulties were encountered.1. Finance: lack of adequate and sufficient finance in terms of the cost of collecting data, and processing the required information hindered the smooth conduct of this project.2. The non-availability of existing research materials made the researcher to search deeply for relevant data information from the internet, library and book stories.3. In the course of personal interview conducted by the researcher, it was difficult to obtain some information, as they were deemed confidential by the companies and persons visited.
1.9 Operational Definition of Terms
For the purpose of clarity, some of the terms in the research work as derived by IAS are explained below.
– Financial Statement: This is a formal record of the financial activities of a business, person or other entity. The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.
– Financial Policies: These are those bases or principles describing a corporation choices regarding its debt/equity mix, currencies of denomination, maturity structure and hedging of decision with a goal of maximizing the value of the firm to some set of stockholders.
– Financial Information: These are data such as credit cards numbers, credit ratings, accounting balances and other monetary facts about a person or organization that are used in billing, credit assessment loan transactions and other financial activities.
– Financial Reporting Standards: This is a set of accounting standards stating how particular types of transactions and other event should be reported in the financial statement.
– Entity: This means an economic unit that is treated as separate from parties having proprietary or economic interest.Investment: These are asset acquired for the purpose of income generation without any activities in the form of production, trade or provision of services.
– Asset: This is a research controlled by an entity as a result of past event from which future economic benefit are expected.Liability: A present obligation to transfer economic benefit as a result of past transaction.