ABSTRACT

The research focuses on three bank‟s financial reporting and why they had adopted the different accounting standards. The banks are Union Bank of Nigeria Plc, First Bank of Nigeria Plc and Standards chartered of Nigeria Ltd. I chose the topic because of my interest in international accounting and way of reporting financial statement in different cultures. The aim of the thesis is to show how companies use different kinds of accounting standards to publish their annual report, the effects of using a particular method of reporting and also to know why financial information are not trusted in the developing countries. The financial information of a company tells much about how companies‟ images are being seen by both local and foreign investors in the outside world.

In the literature review, I enumerated different accounting standards, the background and functions of both international accounting standards and statement of accounting standards. In my methodology; in the research a qualitative research was conducted by interviewing bank chiefs and also gathered materials from secondary sources. In the empirical part, answers were given to the questions listed above. There was a clear difference between the banks using international accounting standard (IAS) and statement of accounting standard (SAS); the former i.e. banks using IAS will be acceptable and more business ready both locally and internationally while the latter bank using SAS might not be business ready to foreign investment since its accounting standards is only local standards. Tabulation was made for the financial statement of all the banks by showing the difference between the financial items that are listed and non-listed by the banks. Finally I attached the financial statement of all the case banks used and concluded that, more still needed to be done by Nigerian banks in their implementation of international accounting standard in order for them to attract foreign investors and more reliability and trust are needed in their financial information.

1. INTRODUCTION

The growth in the global trade economy and the globalization of businesses and financial market, financial information used and prepared according to a national accounting system may no longer satisfy the need of user whose decisions are more needed in the global market. The accounting information used in the local or domestic market may not even be sufficient for business and local investors.

Due to the issues above, the adoption of new global environment and necessity for decision maker, accounting regulating authority have try to find out the solution that will allow for the improvement of financial accounting and its major outputs. The global initiative to have a general rule for accounting standard and practices has over the year been worked on.

In order to satisfy and fulfill this objectives the International Accounting Standards Board (IASB) has prepared and published International Accounting Standards (IAS), which has become reference for the global community.

In the last 15years, most of the discussions have focused on development of international accounting standards, and of recent the standards has been adopted by developed countries, such as United State, Canada and other European nations.

Less discussion has focused on developing countries; this is because of the qualities of financial information and reporting, even with the pressure by some individuals, investors, banks and multinational companies and the willingness to attract foreign investment.

Accounting standards are guidelines which define how companies have to display transactions and events in their financial statements and are not purely technical rules but they are the outcome of highly political processes (Horngren, 1973; Watts and Zimmerman, 1978; and Fogarty, Hussein, and Ketz, 1994). This means that there are different actors who come into contact with or are influenced by accounting standards – e.g. preparers, managers, accounting firms, auditors, financial analysts, employees. All these actors might have differing opinions and interests about what an accurate and useful accounting standard is and therefore might have different incentives in the production and diffusion of accounting standards (Zeff, 1978; Watts and Zimmerman, 1978, Giner, and Arce, 2004).

Although, academics and practitioners agree on the importance of compliance with the requirements of accounting standards as an essential element of the financial reporting infrastructure, many scholars argue that the extent to which standards are enforced and violations prosecuted are as important as the standards themselves (Hossain and Adams, 1995; and Sunder 1997). Thus, the quality of financial information is a function of both the quality of accounting standards and the regulatory enforcement or corporate application of the standards (Kothari 2000; and Hop e, 2001). Absent of adequate enforcement, therefore renders the best accounting standards inconsequential. This is because if nobody takes action when rules are breached, the rules remain requirements only on paper. However, in some environments, firms behave towards “mandatory” requirements as if they were voluntary (Marston and Shrives 1996, Hodges, and Mellett, 2004); Giner, and Arce, 2004; and Cooper and Robson, 2005). Even though accounting policy disclosures are required in most countries as well as by IAS 1 (Saudagaran and Diga 1997), Frost and Ramin, (1997) document considerable variation in accounting policy disclosures within and across countries. The importance of compliance with the requirements of accounting standards is that it enhances transparency, accountability, standardization, uniformity and comparability which in turn enriches the quality of decision of the users and helps in proper allocation of resources in an economy. However, studies in the area as well as on the determinants of application of accounting standards have been few and mixed. For instance, regarding studies on application or compliance, two divergent schools exist.

The application‟s or rightist‟s school is advocated by scholars like Choi (1973); Barrett (1977); Klumpes (1997) and Hope (2003b). This school theorizes that firms apply or comply with accounting standards. The second school of thought, advocates- Deaton and Weygandt (1975); Nobes (1990); Benjamin, Maurice, and Lawrence (1990) and Susilowati, Morris, and Gray (2005) theorize that firms do not apply or comply with accounting standards even under mandatory regimes.