Effectiveness of International Financial Reporting Standard Enforcement in Nigeria

Abstract

Background to the Study The general belief in accounting literature is that the adoption and application of IFRS in developing countries will enhance the quality of financial statement information including its reliability and comparability (Ballas, Skoutela and Tzovas, 2010). However, it is also argued that no matter how high the quality of the accounting standards adopted, comparable and high-quality accounting information will not be achieved without strict enforcement of these standards (White house, 2012). IFRS is “a set of accounting rules, principles and procedures that aim to create a common financial reporting platform with the objective of bringing transparency, accountability, efficiency to financial markets, harmonization of accounting practices and enforcement. Even though some countries claimed they have officially adopted IFRS and mandated companies to prepare financial statements accordingly, some companies may selectively implement IFRS recognition and disclosure requirements. Even with increasing IFRS adoption around the world, notable differences in financial reporting systems will remain due to regulatory, political, and institutional differences across countries, leading to variation in IFRS compliance between different jurisdictions (Soder storm and Sun, 2007). Such variation hinders the main goal of developing a global set of accounting standards which is comparability of accounting information across countries. Chen and Zhang (2010) provided empirical corroboration from the Chinese market that mere adoption of IFRS does not necessarily lead to the perceived high-quality and comparable financial accounting information because of enforcement challenges and lack of full compliance.