Abstract
This study investigates the underlying factors contributing to the International Financial Reporting Standards (IFRS) adoption in Nigeria. The diversity of responses to IFRS adoption is a phenomenon that requires empirical investigation to understand the reasons why some companies adopt IFRS other do not. Previous studies have investigated preparers of financial statements’ compliance with IFRS. However, there is a dearth of research on the influence of cultural factors on IFRS adoption. Little has heretofore has been done to examine cultural variables as determinants of IFRS adoption. This study applies a self-administered survey instrument to elicit data from four major cities in Nigeria. The analysis involves applied logistic regression to estimate the relationship between the covariates and the companies’ decisions to adopt IFRS. The results indicate companies’ professionalism, transparency, flexibility, secrecy, uniformity and statutory control are significant factors impacting IFRS adoption at different magnitudes. For example, a company that considers IFRS will increase the level of financial statements transparency is more likely to maintain some levels of secrecy. The study identifies that IFRS adoption can only be successful when accountants develop the relevant technical expertise in IFRS requirements prior to the implementation. Consequently, there is a need for more practical training in IFRS accounting valuation, recognition, measurement and disclosure of financial information to users of financial statements. The diversity in responses to IFRS adoption, where some companies adopt and others show resistance to IFRS requirements has been a phenomenon that requires empirical investigation to understand the rationale. Though some studies have investigated companies’ compliance with accounting regulations in Nigeria, there is limited research on factors influencing IFRS adoption. A consequence is that efforts to come up with effective policies to enhance IFRS adoption and obtain compliance status for Nigerian companies are constrained. The objective is to contribute to initiatives aimed at assuring foreign investors of reliability of IFRS financial statements prepared by Nigerian companies.
Highlights
Adoption of International Financial Reporting Standards (IFRS) became an important topic of interest after 1973 when variation in accounting practices and financial information asymmetry became sources of concern for accounting professionals and investors (Carlson, 1997)
Accounting researchers are concerned whether the implementation of IFRS, a product of a monopolistic accounting standard setter is the right decision towards a global accounting practice, since accounting is related to culture and culture is dynamic across jurisdictions and within countries (Borker, 2013b; Gray, 1988; Sunder, 2009)
The empirical model on how company’s cultural factors impact IFRS adoption is based on eight factors solution. These include professionalism, statutory control, optimism, conservatism, transparency, secrecy, flexibility and uniformity obtained from the Exploratory Factor Analysis (EFA)
Summary
Adoption of International Financial Reporting Standards (IFRS) became an important topic of interest after 1973 when variation in accounting practices and financial information asymmetry became sources of concern for accounting professionals and investors (Carlson, 1997). Accounting researchers are concerned whether the implementation of IFRS, a product of a monopolistic accounting standard setter is the right decision towards a global accounting practice, since accounting is related to culture and culture is dynamic across jurisdictions and within countries (Borker, 2013b; Gray, 1988; Sunder, 2009). The X-compliance report is the NSE initiative to ensure that listed companies comply with the requirements for listing on the stock exchange, including compliance with the accounting standards (Nigeria Stock Exchange, 2013)
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