Sample Finance Paper on International Financial Recording Standards (IFRS) in Nigeria

The international financial recording standards IFRS are a set of accounting standards created for universal use. These standards were built to harmonize accounting standards globally. Globalization has played a significant part in the design of the standard as they seek to ensure that all countries globally can be able to compare accounting records. Most developing countries have adopted IFRS, and developing countries are also catching up. In 2010 Nigeria began the consideration to adopt IFRS, and the move was approved in 2012 by the Nigerian Federal Executive Council. The approval was under the direction of the Nigerian Accounting Standards Board. The paper hopes to establish how the adoption of IFRS has been in regards to the benefits and disadvantage as well as challenges faced

The IFRS adoption in Nigeria has not been as successful as expected. The expectations for the adoption included the fact that the benefits would outweigh the cost of implementation. However, the cost of IFRS adoption in Nigeria has been very high, and the results have not been as desirable. The adoption of IFRS was expected to increase foreign investment significantly. It was also to streamline records, so that’s it would be easier for users of the information to develop better economic decisions. It would reduce the cost of information and facilitate bridging the communication gap with stakeholders (Abdulsallam et al. 165). Even the primary intent of promoting uniformity of language has failed particularly because most accounting students and professionals in Nigeria do not have adequate knowledge of IFRS.

Several other challenges are affecting the success of IFRS in Nigeria. One of those challenges is a lack of awareness. Many people could benefit from the information collected through IFRS. The problem, however, is that these users have no idea that they can benefit from this information and do not even understand the need for IFRS (Odo 426). The Nigerian government should develop better awareness creation initiatives for the public and also for accounting students and professionals. It is essential to consider adding IFRS into the syllabus for accounting students as well. When more people are aware and informed about the advantages, they could benefit from IFRS. They will be more willing to comply with the standards and use them for economic benefits.

Another challenge to the success of IFRS is culture. IFRS was mostly developed for the western world and not designed for African countries. The adoption of the system in an African country is, therefore, challenged by cultural dynamics. One of the significant challenges to the adoption of IFRS is the differences in businesses. The businesses in Africa are different from those in the EU, especially when considering SMEs (Ezeagba 3). The dynamic difference, therefore, makes the financial standards different, and in some cases, the IFRS ends up being irrelevant or dysfunctional. What works for western countries does not necessarily work for an African county such as Nigeria. The consideration for the cultural aspect must be embodied if the IFRS adoption should be successful. Political elements have also affected the IFRS adoption. Political tensions, especially in areas where rivalling parties disagree, may lead to inadequate or incorrect information records which in turn hurts the whole IFRS adoption.

The IFRS adoption in Nigeria has not been entirely unsuccessful. The adoption has managed to increase the GAAP hence higher quality financial reporting has been established. There has also been an increase in the share of foreign capital and trade in the Nigerian economy. An increase in foreign direct investors has also shown that the adoption of IFRS gives assurance to investors that there is more reward in the market than risks (Jinadu et al. 99).  These benefits are, however, not enough to establish successful adoption. Some of the disadvantaged that the country has experience include a high cost of investment into IFRS, which has not proven to be lower than the benefits achieved. Apart from the financial strain, the adoption of IFRS has brought more confusion into the economic world, especially with some accountants, accounting, students, business owners, and other stakeholders not understanding its importance. When most people are not on board with the system being adopted, it is hard to have a successful implementation. IFRS intended for more transparency and understandability in the financial world. In Nigeria, however, political elements can influence the transparency of data and information collected hence jeopardizing the credibility of the whole IFRS system.

In conclusion, we can establish that the threat to successful adoption in Nigeria has been caused by poor planning. There were fewer resources allocated to creating awareness and knowledge distribution and for proper funding implementation. Without the support of the people, the IFRS will be just another useless system adopted by the government. The government should have considered an implementation strategy that embodies the cultural dynamics of Nigeria. They should have designed the IFRS implementation to fit the needs of Nigeria and not the needs of the Western countries. Success would have been achieved by dropping the assumption that one design fits all.

 

Works Cited

Abdulsallam, Nasiru, et al. “Quality of accounting reporting after the IFRS adoption in Nigeria.” International Journal of Business, Economics and Management 3.11 (2016): 160-172.

Ezeagba, Charles. “Financial Reporting in Small and Medium Enterprises (SMEs) in Nigeria, Challenges, and Options.” International Journal of Academic Research in Accounting, Finance, and Management Sciences 7.1 (2017): 1-10.

Jinadu, Olugbenga, Stephen Aanu Ojeka, and Oyebisi Mary Ogundana. “IFRS adoption and foreign direct investment: Evidence from Nigerian quoted firms.” Mediterranean Journal of Social Sciences 7.2 (2016): 99.

Odo, John Onyemaechi. “Adoption of IFRS in Nigeria: Challenges and the Way Forward.” International Journal of Academic Research in Business and Social Sciences 8.8 (2018): 426-440.