THE CHANGES IN ACCOUNTING STANDARDS AND ITS IMPACT ON FINANCIAL - STATEMENT

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

In recent years, there has been a lot of criticism about accounting standard and the impact of the recent changes in financial report they prepare. A lot of people have led to question the validity of the profit measuring procedures applied in arising at the profit disclosed in published accounting. Quite a number of proposal have been made in an attempt to reform the methods generally in used.

This has resulted in coming together of different countries with a view to working out modalities for the standardization of these profit measuring and reporting procedures.

A new set of rules, which would align Nigeria with other countries and also improve investors confidence was formed in May 2011 known as international financial reporting standards (IFRS) which was issued out by international accounting standard boards which is globally accepted specially IFRS are defined in compromise

The 13 IFRS in issue are:

IFRS 1       –        First time adoption of IFRS

IFRS 2       –        Share based payment

IFRS 3       –        Business combination

IFRS 4       –        Insurance contract

IFRS 5       –        Non-current asset held for sale and discontinued operation.

IFRS 6       –        Exploitation for and evaluation of mineral resources

IFRS 7       –        Financial instruments disclosure

IFRS 8       –        operating segments

IFRS 9       –        Financial instrument

IFRS 10     –        Consolidated financial statement

IFRS 11     –        Joint arrangements

IFRS 12     –        Disclosure of interest in other entities

IFRS 13      –        Fair value measurement.

This work intends to analyze and examine the impact of these standards, the financial statement with particular emphasis on Guinness Nigeria Plc Benin, Edo state.

1.2     STATEMENT OF THE PROBLEM

Good accounting practice means that the account must be in accordance with the international financial reporting standard (IFRS), and the international accounting standard (IAS). The impact of accounting standard in the finance statement of an organization cannot be over emphasizes.

Moreover, the problem can be summarized below:

a       Lack of personnel with adequate knowledge of accounting standard is a major issues affecting the changes.

b       Lack of infrastructures and equipment which help to obtain most accurate information and report.

d       The problem of poorly designed accounting system in organization

e        The effect if faulty financial statement and report and the analysis produced by the management towards the achievement of the organizational goal.

f        The effect of financial statement and report which are not prepared at the appropriate tine.

g       Ineffectiveness of financial statement due to its improper application.

1.3     OBJECTIVE OF THE STUDY

The objective of this research work is intended to do the following:

A       To revealed that the changes in accounting standard play a vital role on the financial statement of the companies that adopted the changed.

B       To determine information about the changes in the net resources of the business organization

C       To find out if accounting standard is cumbersome and create problem.

D      To determine whether accounting and financial statement enhance accountability, transparency and improve quality to financial results of the organization.

1.4    RESEARCH QUESTION

The following are research questions postulates to guide the study.

1.5         RESEARCH HYPOTHESIS

The following hypothesis were formulated in order to determine the validity and reliability of the study.

a  HO: The changes in accounting has no impact on the financial statement.

b  Ho: Adoption of the accounting standards does not help in the standardization are harmonization of financial statement

Ho: Adoption of the accounting standards help in the standardization are harmonization of financial statement

c   Ho: it is of no importance to determine the extent of compliance of some organization in the preparation of the financial statement.

1.6         SIGNIFICANCE OF THE STUDY

The accounting standards are developed to ensure higher degree of standardization in the published of financial statement. They provide the necessary information about how accounting information should be presented in order to enhance the value of its content and facilitated through understanding.

The significance of this study to the academic world cannot be over emphasized. It is of benefit to all users of accounting information who need to interprets and use proper understanding of the financial standard and the information so derived in making management decision for the interest of the organization.

Another most importance of the study is to reveal to the management of (Guinness Nigeria Plc Benin, Edo state) on the standards in financial statement and also an accounting guides to staff of the organization

Lastly, this study would also serve as reference literature to further researchers on the changes and impact of accounting standards.

1.7         SCOPE / DELIMITATION OF THE STUDY

Despite the fact that the study is based on the impact of accounting standards in financial statement. It also covers the importance of the standard, application, compliance thus the need for the standards and also the main aim of this standardization.

The limitation is as a result of limited time, insufficient fund available with the researcher and limited source of material. Restriction of some vital information about the company with a response of confidential issue.

1.8         DEFINITION OF TERMS

A           Standards: The simply means the regulations governing the use of financial statements.

B           Changes: This simply means the process of becoming different form he former state.

C           Fair values: The price that would be received to see and asset or paid to transfer a liability in an orderly transaction between market participants at the measurement data

D           Financial statements: These are statements used in recording financial transaction of any balance sheet of business.

E           Joint Arrangement: An arrangement of which two or more parties have joint control.

F           Financial instrument: A document that has a monetary value or represents a legally enforceable agreement between two parties e.g shares.

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1         INTRODUCTION

Prior to the information of the international accounting standards committee (IASC) on 29thJune, 1993, by a group of pioneer accounting bodies in united kingdom, united state of America, Australia, Canada, France, Germany, Japan, Mexico, the Neither land and Island.

Merge (1979) says that there existed differences both inform of these accounting standards. It was in the light of these differences that the international accounting standards committee (IASC) come with their objective to harmonize these standard and made their application world-wide.

Amore (1986:16) says that the standards issue by the (IASC) however, does not meet our local conditions environment, thus the need for Nigeria to have local accounting setting body that would give due economic environment when setting these standard become necessary.

Further, Falyse (1984:22) stressed that if accounting standards are to contribute effectively to the accounting development and business environment effort, they must be turned to our social legal and business environment.

However, with the global movement towards single financial reporting standard, the previous initiative of the Nigeria accounting standards Board (NASB) Now replaced with financial Reporting Council (FRC) of Nigeria with convergence with international financial reporting standard (IFRS) by adaptation. Nigeria IFRS road map was released in 2010 and recommended them to adopt the IFRS in Nigeria from 2012

2.2         THEORETICAL FRAMEWORK

It is obvious that accounting standards are important ot all users of the statement of accounting and allied course as they are usually subject of examination it is obvious that the users of accounting standards.

A   PREPARES ACCOUNTING INFORMATION: Preparation of accounting information includes:

a.  The financial statement

b.  The auditor

The financial accountant who may be acting in the capacity of chief Accountant prepares the annual accounts of the organization with attempts of complying with the accounting standards.

The auditor must audit the financial statement prepared by the financial accountant and find out if the statement complies with specific requirements of the accounting standards and the express his opinion as to whether the financial statement shows a true and fair view or not.

B.  USE OF ACCOUNTING INFORMATION: accounting information provided by financial statement is used by various people. This group of users needs the knowledge of accounting standards to have through understanding of the financial statements.

i. Management: They use the standard to get better understanding of the financial statement for analyzing the organization’s performance and position and taking appropriate measures to improve the company results.

iii. Investors: For analyzing the feasibility of investing in the company. Investors want to make sure they can earn a reasonable return on their investment before they commit and financial resources to the company. Example lenders and debentures holders.

Other users of financial statement include banks financial analysts economists and statistics.

2.3         CURRENT LITERATURE REVIEW

The IASB (International accounting standards Board) is an independent group of 14 experts with an appropriate mix of recent practical experience in setting accounting standards, in preparing. Auditing, or using financial reports and in accounting education.

The international accounting standard Board IASB members are responsible for the development and publication of IFRS including the IFRS for SME’s. the IAS is also responsible for approving interpretations of IFRS as developed by the IFRS interpretations committee (formerly IFRIC.

All meeting of the (IASB) follows a thorough open and transparent due process of which the publication of consultative documents such as discussion paper and exposure drafts for public comment is an important component.

The (IASB) engage closely with stakeholder around the world including investors analysts, accounting standards letter and the accounting profession the IFRS interpretation committee comprises 14 voting members appointed by the trustee’s and drawn from a variety of countries and progression background.

The financial reporting council has been pre-occupied with exposure drafts and the issues of international facilities, reporting standard. To date Nigeria has 13 accounting standards wholly developed to suit the economic environment.

IFRS – 1 FIRST TIME ADOPTION OF IFRS

A first time adoption of international financial reporting standards (IFRS) is to ensure that an entity’s first (IFRS) financial statements provide high quality information that is transparent and comparable over all periods presented, is a suitable starting point for accounting under IFRS and can be generated at a cost