IMPACT OF THE ADOPTION OF IFRS ON VALUE RELEVANCE AND ACCOUNTING INFORMATION IN THE INSURANCE - SECTOR
CHAPTER ONE
INTRODUCTION
1.1Background to the Study
Accounting literatures on value relevance research dates back to early 1960s with the
remarkable seminal work of Ball and Brown (1968) being the center stage. The work provided an extensive analysis on the value relevance of accounting information and equity valuation and found that accounting information contained in financial statement have an effect on share price. This perhaps laid the foundation for numerous empirical studies seeking to measure association between accounting numbers and equity values in both the developing and developed world. Recent studies however, have taken a different dimension by measuring the association between value relevance of accounting information under different regimes of accounting standards that is local standards (GAAP) and the International Financial Reporting Standard (IFRS). IFRS is in the fore front of accounting standards used in the world today with over 120 countries fully adopting it.
Nigeria is a signatory to the International Financial Reporting Standard (IFRS) which
compels its public and special entities to adopt the new accounting standard. This is following the approval of the Federal Executive Council in December 2010, the then Nigerian Accounting Standards Board (NASB), now designated as Financial Reporting Council of Nigeria (FRCN)) issued an implementation roadmap for Nigerian‟s adoption of IFRS which set a January 2012 date for compliance of publicly quoted companies, banks and insurance firms in Nigeria. The Central Bank of Nigeria (CBN) and the Securities and Exchange Commission also adopted this date for compliance and issued guidance compliance circulars to ensure full implementation of
IFRS in Nigeria.
Several studies such as: Laurenco and Curlo (2008), Hung and Subramanyam (2007), Bartov, Goldberg & Kim (2005), Barth, Landsman & Lang (2008), have compared the value relevance of accounting information under IFRS and domestic standard in various countries.
IFRS was adopted in Nigeria to overcome the weaknesses of Statement of Accounting Standard
(SAS) and improve the quality of financial reporting (Bagudo, Abdul Manaf and Ishak,2015).
The country‟s vision 20:20:20 envisioned the country‟s insurance sector to be among the highly placed emerging markets famous for high market capacity and transparency to achieve a position in the 20 largest insurance markets in the world by the year 2020Badejo (2014).
The Nigerian insurance industry is ranked 65th globally in terms of size and 6th in Africa out of 8 largest markets; nevertheless the operational scope of the operators is still vague thereby reducing its strategic role in the domestic economy (National Technical Working Group report, 2009).For these strategic roles to be achieved researchers have advocated the increasing need for more relevant and timely accounting information due to the increased sophistication of investors, hence an increased focus on this issue would perhaps reduce investors‟ reliance on non-accounting sources of information. Therefore, the need for value relevance of accounting information became eminent to achieve the vision. This makes the early adoption of IFRS in the insurance industry to be seen as a move in the same direction considering that the industry has recorded a considerable growth. For foreign investors, the adoption of IFRS will provide them with better understanding of the company's financial statements so that they can take better decisions based on such information.
In 1997, the National Insurance Commission (NAICOM) was established with the
aim of
Terms of Use: This is an academic paper. Students should NOT copy our materials word to word, as we DO NOT encourage Plagiarism. Only use as a guide in developing your original research work. Thanks.
Disclaimer: All undertaking works, records, and reports posted on this website, eprojectguide.com are the property/copyright of their individual proprietors. They are for research reference/direction purposes and the works are publicly supported. Do not present another person’s work as your own to maintain a strategic distance from counterfeiting its results. Use it as a guide and not duplicate the work in exactly the same words (verbatim). eprojectguide.com is a vault of exploration works simply like academia.edu, researchgate.net, scribd.com, docsity.com, course hero, and numerous different stages where clients transfer works. The paid membership on eprojectguide.com is a method by which the site is kept up to help Open Education. In the event that you see your work posted here, and you need it to be eliminated/credited, it would be ideal if you call us on +2348064699975 or send us a mail along with the web address linked to the work, to eprojectguide@gmail.com. We will answer to and honor each solicitation. Kindly note notification it might take up to 24 – 48 hours to handle your solicitation.