RELEVANCE OF INTERNATIONAL FINANCIAL REPORTING STANDARD
ADOPTION IN NIGERIA FINANCIAL SERVICE FIRMS
This study examines the value relevance of International Financial Reporting Standards adoption in the Nigerian financial service firms. The study utilizes secondary data extracted from 35 listed firms for the period of 8 years (2008 to 2015); 2008-2011 for pre IFRS adoption and 2012-2015 for post adoption. The study uses correlation, pre and post research designs. Multiple regression models areused as technique of data analysis adapting Ohlson model (1995). The findings reveals that book value per share is more value relevant in post IFRS adoption on share price of listed financial service firms in Nigeria. While, earnings per share is more value relevant in preIFRS
adoption. Capitalized intangible assets are also more value relevant in post IFRS adoption period. Post IFRS adoption accounting information is more value relevant than pre IFRS period.The Study concludes that mandatory adoption has been proven to enhance the relevance of book value of equity to the users of accounting information of financial service firms in Nigeria while IFRS adoption has not improved the value relevance of earnings per share of the listed financial service firms in Nigeria. IFRS adoption reflects value relevant information on capitalized intangible assets. IFRS adoption period is more value relevant on accounting information. The study recommended among others that investors and management of Nigerian financial service firms should adhere strictly to IFRS as it impacted on book value per shareand
capitalize intangible assets for investment decision as they contain more explanatory power on share price after IFRS adoption.
1.1 Background to the Study
Accounting standards have changed greatly over the past decades with regard to the consistently increasing emphasis placed on measurement of assets base on fair valuation and pressing need for harmonization. However, in order to address the need of various users of financial information, locally formulated standards limit the ability to undertake cross boarder comparison. Therefore, the need for harmonizing of global financial accounting increased. The journey for the international harmonization toward a unique and global set of accounting standards started in 1973 when 16 professional accounting bodies agree to form the International Accounting Standard Committee (IASC).
The rationale behind the formation of the Committee was to produce and issue the International Accounting Standards (IAS) which came out of necessity to encourage growth in trade and investment between countries around the globe. The Committee as reorganized in 2001 to become International accounting Standard Board (IASB) which develops and issues International Financial Reporting Standards (IFRSs). Consensus has been reached that quality of accounting reporting is paramount to the information users for various decisions making purposes. IFRSs are increasingly becoming more acceptable set of regulations followed by many countries. In an effort to increase comparability, European Union mandated the adoption of IFRS to all its public entities in 2005. It is reported that more than 130 countries conformed to IFRSs as domestic
reporting standards with 90 countries fully adopted (PWC, 2016).
statement of the Problem
The purpose of accounting information to stakeholders is to provide information about the entire aspect of their investment. Useful and timely information is needed about the assets, liabilities, equity, revenue, profits or losses, cash flows, stakeholders, strength and weakness of the business. Potential and existing investors rely on accounting information in their pricing of shares and take a decision on whether to have a stake in the business or not. Proponents of fair value accounting (mark-to-market) such as Veron (2008) and Barth (2006) argue that historical cost accounting (which is the measurement procedure during SAS regime) lack relevance as the information produced by the historical cost model do not reflect market situations and hence, is
irrelevant for decision and even misguiding. In a Stock market like any other market, prices are determined by the forces of demand and supply. In line with the argument of Malkiel&Fama, (1970), any company that supplied relevant information needed by investors may likely have the lead and undue advantage over the others.
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