Journal of Advanced Management Science Vol. 2, No.

1, March 2014

Adoption of International Financial Reporting

Standards in Nigeria: Concepts and Issues
Adejoh Edogbanya and Hasnah Kamardin
School of Accounting, College of Business, Universiti Utara Malaysia
Email: [email protected], [email protected]

AbstractThe study was all about the concepts and issues of

International Financial Reporting Standards (IFRS)
adoption by corporate organisations in Nigeria. This
research is based on data obtained from survey and
literature in the context of worldwide convergence,
compliance and adoption processes of IFRS. The article also
compares the Nigerian GAAP and IFRS. There is high
compliance in adoption particularly by financial institutions
and other corporate bodies with little hitches.
Recommendations were made amongst which are; provision
of proper guidelines on implementation and introduce
awareness programme to improve the degree of
compliance.

public interest but not first tier are to adopt in 2013 and
all small and medium scale entity use it by January, 2014.
Financial reporting standard exists because it serves as
stewards to the owner of firms as ownership is divorced
from controlling the activities of the business [3], [4].
II.

Internationalisation and globalisation of business has

given reason for harmonised financial statement
preparation and presentations [5]. Companies compete
globally for limited resources, shareholders, potential
investor and creditors as well as multinational enterprises
are required to bear the cost of adopting financial
statement that are prepared using national standards [2] .
It is expected that the move towards IFRS convergence
will enhance capital market performance and ginger
global business expansion in Nigeria. In the view of this
development all corporate organisation are expected to
adopt and comply with IFRS in preparation and
presentation of their financial statement [6].
There is wide spread adoption and compliance by other
country of the world. In a survey conducted by
Reference [7] on Spanish stock market, on how to
hedge disclosures, today firms face several financial risks
in their daily business activities due to global,
international trading and transactions. One way to cope
with this kind of risk is to use hedging because of its
lower cost and good solution to solving risks in business
entity [8]. Additionally, Reference [9] conducted a
survey on reclassifications of financial instruments in
Nordic countries on the effect of reclassification
amendments on Nordic banks financial statement.
Quantitative survey was conducted on these Nordic banks
and the results are as follows. 47% of sampled Nordic
banks reclassified financial instrument in 2008 and 12%
in 2009. All the banks increased their net profit as a result
of reclassifying their financial instrument in 2008 and
2009. On the influence of IFRS implementation on
business management, the finding of the study shows that
there are positive effects from the adoption of the IFRS
by Finnish companies [10]. IFRS are seen as a
comprehensive information package where the
management gets improved financial information easier
for their decision making and judgement. In another
research conducted by Reference [10] that mandatory
IFRS contributes and improve business environment. The
study was a survey report. He also found out that after

Index Termsadoption, IFRS, compliance, Nigeria.

I.

INTRODUCTION

Globalisation of capital market and internationalisation

has come to stay. The need for harmonisation of financial
statements and single set of consistent high quality
financial reporting standard gained wide spread
acceptance amongst policies makers, standard setters and
preparers [1]. The need for quality and uniformity in the
preparation and presentation of financial statements gave
birth to International Financial Reporting Standards
(IFRS). Before the adoption in Nigeria, there was legal
and regulatory framework of accounting in respect to
preparation of financial report in Nigeria [2]. The
Company and Allied Matter Act (CAMA90) prescribe
some format and content of company financial statement
disclosure requirements and auditing. It requires that the
financial statement of all corporate organisations comply
and adhere with the Statement of Accounting Standards
(SAS) issued from time to time by the Nigerian
Accounting Standard Board (NASB). This also requires
that audit be carried out in accordance to with the General
Auditing Standards. Therefore, the adoption of IFRS in
Nigeria was launched in September, 2010 by the then
Minister of Commerce and Industry. The adoption was
organised in such that the entire stakeholders that prepare
and present financial statement use it by the beginning of
2014. the adoption was made in such a way that all the
first tier companies listed on the stock exchange and are
of public interest use it by 2012, all other company of
Manuscript received September 3, 2013; revised December 15, 2013.

2014 Engineering and Technology Publishing

doi: 10.12720/joams.2.1.72-75

LITERATURE REVIEW

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Journal of Advanced Management Science Vol. 2, No. 1, March 2014

mandatory IFRS adoption, the quality of information in

accounting and business environment increased
significantly more for mandatory adopters. The impact of
inclusion of IFRS in schools and colleges curriculum, this
will enable the potential accountants to be well trained
before joining the accounting and auditing profession
[11].
III.

should increase and lead to better informed valuations in

equity markets, thereby lowering investors risks.
TABLE I.
AREAS
Financial
statement
presentation

METHODOLOGY

To address the convergence and adoption of IFRS in

the context of the transformation of financial reporting,
the paper adopts review approach. The research presented
here holds on an analysis of discourses within the range
of documentary evidence and is based upon an
examination of major publications and materials
emanating from the professional accounting bodies and
academic research carried out in the past. This paper is
purely a conceptual review [12], [13].

Property,
plant
and
equipment

IV. REGULATORY FRAME WORK OF ACCOUNTING

PROFESSION IN NIGERIA
The preparation of financial statement by corporate
organisation must follow certain rules, principles and
guideline Nigeria before the introduction of IFRS. The
rules are stated in the Company and Allied Matter Act
(CAMA) 1990. The act prescribes some format and
content of what must be included in the companys
finanancial statements disclosure requirements and
auditing. It requires that financial statement of companies
must comply with the Statement of Accounting Standards
(SAS) issued from time to time by the Nigerian
Accounting Standard Board (NASB) and audit carried
out in accordance with generally accepted auditing
guidelines and standards. The NASB Act No22 of 2003
formerly created the NASB and established for it an
inspectorate unit. The NASB came into being on
September 9, 1982. It is the only recognised independent
body in Nigeria responsible for the development and
issuance of statement of accounting standards for users
and preparers of financial statements, investors,
commercial entities and regulatory agencies of
government [14]. Other laws include the Bank and other
Financial Act (BOFIA) 2004 and the Small and Medium
Scale Entities are to adhere strictly to the presentation of
their information using relevant sections of SAS.

Limited
disclosure but
expected

.Segment
reporting

More
on
geography

IFRS- first
time
adoption

Not applicable

Financial
guarantees

Disclosed as
contingent
liabilities
General
principles
General
expenses and
disclosure on
pension
Limited
disclosure on
foreign
exchange and
credit risk.
Based
on
general
guideline,
operating and
finance lease
No
specific
standard

Risk
management
disclosure

Leases

V. THE EFFECT OF IFRS ADOPTION IN NIGERIA

2014 Engineering and Technology Publishing

NG-GAAP
Income
statement
Balance sheet
Cash
flow
statement
Value added
statement
Accounting
policies
Note
to
account
Directors
report
Measured
using
cost
model

Related
parties

Scope
of
consolidation
Employees
benefits

The following theoretical argument explains how IFRS

could potentially affect accounting quality and
comparability. The effect is in two different steps, the
effect into first order effect and second order effect [11].
Harmonising accounting standards by establishing one
uniform set of standards has direct effects on the property
of the firm financial statement information. Reference
[15]-[16] relates IFRS quality reporting than the local
(GAAP) accounting. He suggests that Quality reporting

DIFFERENCES BETWEEN IFRS AND NIGERIAN GAAP

Impairment

Financial
assets
classification
and
valuation

Classification
includes; cost
and amortised
cost

IFRS
Statement of comprehensive
income
Statement
of
financial
position(balance sheet)
Statement of changes in equity
Statement of cash flows
Accounting policies
Notes
Significant
management
estimates and judgement

Measured using cost model with

detailed guidance regarding;
Componentisation
Useful life
Residual value
Impairment calculations and
identifying cash generating unit
Detailed
guidance
on
identification of related parties
and detailed disclosure of related
parties and transactions.
operation segment based on
management view
Threshold
for
reportable
segments is result or assets of an
individual segment should be
10% or more of all segment.
If the aggregate revenue of all
reported segments on this basis is
less than 75% of total , then more
segment required until 75%
threshold is reached.
Provide
guidance
and
requirements on the transition to
IFRS. Also provides relief for
certain items in the preparation
for opening balance sheet
Requires financial guarantees to
be recognised at their fair value
Investment under control is
consolidated.
Complex criteria of accounting
Recognise the undiscounted
amount of short term employees
benefit.
Credit risk
Liquidity risk
Price risk
Capital risk management
Risk management
Fair value and amortised cost are
used in valuation.
Certain
transactions/contracts
containing hidden leases which
needed to be accounted for.
Carry out impairment test based
on trigger vent
IFRS 36 impairment on nonfinancial assets
IAS 39 impairments on financial
assets
Classification included; amortised
cost, fair value cost. This is
driven by the business model and
the nature of instrument.

*Source: Adekoya, (2011) in Abdulkadir (2013)

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Journal of Advanced Management Science Vol. 2, No. 1, March 2014

E. Nigerian Stock Exchange ACT (NSE) 1961

The NSE started operation in 1961. The ACT states
that for any company to be listed on the floor of the
Nigerian Stock Exchange that firm must comply with the
accounting standards as issued by NASB.

VI. THE IMPACT OF IFRS ON TAX IN NIGERIA

IFRS berth Nigeria, its implementation posses major
challenges for tax practice in Nigeria. IFRS is a whole
body of literature adopted and published by the
International accounting Standard Board (IASB). It
includes standards interpretations and framework which
are continuously evolving, and affects financial statement
in four conceptual areas, namely; presentation, disclosure,
recognition and measurement. For example, capital
expenditure incurred is not tax deductible under
Company Income Tax Act (CITA) in lieu of this CITA
grant capital allowances to deserving tax payers which in
some cases may be higher than depreciation expenses
(KPMG 2013) instead, IFRS decide to prescribe a tax
depreciation rate for repair of plant and machineries. This
will significantly affect the income statement and
balances sheet as there will be increase in net worth and
increase in profit which may not be the true state of the
financial statement. There is need for amendment of
CITA in order to go in line with the new financial
reporting standards.
VII.

F. Company Income Tax ACT (CITA) 2004

This ACT requires the way and manner of presentation
of financial statement as requires by law for taxation
reasons. It is mandatory for companies to comply with
provision of CITA in presentation their financial
statement to tax authorities.
VIII. DIFFERENCES BETWEEN NIGERIAN GAAP AND
IFRS
The International Accounting Standard Board (IASB)
developed the IFRS and the Nigerian GAAP was
developed by NASB called Statement of Accounting
Standard (SAS). There are some significant differences
that exist between the two. The Table I explains the
details of the differences [2], [16], [17].

OTHER RELEVANT LAWS

IX. CONCLUSION AND RECOMMENDATIONS

The purpose of this paper is to bring out issues and
concepts of IFRS in general and its relationship to
corporate business. There is high degree of compliance
and adoption by financial institutions and other corporate
body in Nigeria. In a survey conducted by Reference
[18] states that companies are complying because of
penalty prescribed by the regulatory body for nonimplementation. Reference [19] Identifies that there
will be more multinational participation in the country
that has adopted. There will be standardisation of
accounting information and uniformity all over [20].
Although, the challenges of adoption in Nigeria is the
high cost, where personnel need to be trained and even
the effect on taxation and profit level as a result of
adoption in Nigeria. Meanwhile, the following
recommendations are essentials;
Introduce awareness programme for improving the
degree of compliance with IFRS requirements
Provide guidelines on proper implementation of
IFAC code of ethics for professional accountants
and practitioners
The government should amend the company ACT
in Nigeria for improving compliance culture
Academic, professional, and education curriculum
should inculcate IFRS

A. Central Bank of Nigeria ACT (CBN) 1991

This ACT of CBN stipulates supervision framework,
the frame work is in respect of banking supervision in
Nigeria. The functions of CBN in respect to banking
services includes; conduct off-site surveillance, on site
control of money deposited, specialised registry credit
bureau and related institution, development of standards
and consolidated supervision and finally forming policies
of government. All these are aimed at effective financial
services to financial sector of the economy
B. Company and Allied Matter ACT (CAMA) 1990
This is the central of business law in Nigeria. The trend
and history of this ACT started in 1720 when the Bubble
ACT was enacted. It was later called Joint Stock ACT of
1844 and later renamed to Company Ordinance of 1922
and later became the company ACT of 1958 and was
later changed to Business ACT of 1968. This law existed
until the law was later changed to CAMA in 1990. One of
the basic structures of this ACT is preparation and
presentation of financial statement and report.
C. National Insurance ACT (NIA) 2003
The ACT stipulates that insurance companies shall
abide by rules and regulation that guides preparation and
presentation of financial statement to ensure conformity
and transparency.

REFERENCES

D. Investment and Security Exchange ACT (ISE) 2007

The ACT stipulates corporate responsibilities of public
companies. These are filling of annual report and period
report with Security and Exchange Commission (SEC),
disclosure of internal control system and registration of
public company auditors with the commission. They also
ensure financial statement is prepared using the
prescribed format by NASB.

2014 Engineering and Technology Publishing

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Adejoh Edogbanya was born on September 17th,

1978. He is from Anyigba, Kogi State, Nigeria. He
is married with two daughters from one wife. He is
a graduate major in B.Sc Accounting and Master of
Business Administration (MBA) from Bayero
University, kano 1999 and 2002 respectively. He
holds a M.Sc. degree in Accounting from Kogi State
University, Anyigba in 2013. He is a graduate
of post graduate diploma from the Nigerian College of Accountancy,
Jos, Nigeria in the year 2010. He is a lecturer with the Department of
Accounting, Kogi State University, Anyigba, Kogi State, Nigeria and
currently a Ph.D. student at Universiti Utara Malaysia. He has attended
both local and international workshop among which are; Global
Environment Workshop hosted by the British Council in the year 1997,
workshop on HIV/AIDS in 1998 and workshop in e-Administration in
Nigeria Universities. As academics, he has attended and presented paper
in both local and international academic conferences. He has published
articles in both local and international journals. Adejoh Edogbanya is a
Certified National Accountant (CNA) with Association of National
Accountant of Nigeria (ANAN) and an associate member of the
Institute of Chartered Economists of Nigeria (ICEN). He is a member of
Rotary Club of Rotary International where he served as president in
2008/2009 RI year.

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