IMPACT OF IFRS DISCLOSURES ON ORGANIZATIONAL PERFORMANCE
CHAPTER ONE
INTRODUCTION
1.1 STUDY BACKGROUND
Many countries are moving toward International Financial Reporting Standards (IFRS), common accounting rules that define how transactions should be reported and what information should be disclosed in financial statements, as the business world’s financial and trade ties become closer (IASB, 2007). Many problems have been solved while others have been created as a result of this unified set of standards. This study, on the other hand, is looking into the impact of IFRS disclosures on organizational performance.
It is critical to consider the big picture and the overarching goal of IFRS. International comparability is critical in an increasingly global market to enable effective allocation of scarce resources. To achieve international comparability, the world’s major economies must commit to a single global set of accounting standards. While over 100 countries have already adopted IFRS, key countries such as the United States, Japan, and India have yet to make IFRS mandatory for publicly traded companies (Bradshaw et al, 2012).
It is important to note that companies that use the same standards to prepare their financial statements can be more accurately compared to one another. This is especially important when comparing companies located in different countries, as they may otherwise prepare their statements using different rules and methodologies.
This increase in comparability has assisted investors in better determining where their investment dollars should be directed, thereby improving organizational performance as more investors invest in the company.
However, the United States has yet to adopt International Financial Reporting Standards, and other countries are also delaying (Bradshaw et al, 2012). This complicates accounting for foreign-based companies doing business in the United States, as they frequently must prepare financial statements using IFRS and another set using American Generally Accepted Accounting Principles (Bradshaw et al, 2012).
The principles-based, rather than rules-based, philosophy is used in IFRS disclosures. A principles-based philosophy implies that the goal of each standard is to arrive at a reasonable valuation, and that there are numerous paths to that goal. This allows companies to tailor IFRS disclosures to their specific circumstances, resulting in more easily read and useful statements.
There is a disadvantage to the flexibility of IFRS disclosure in that it allows organizations to use only the methods they want, allowing financial statements to show only desired results. This can result in revenue or profit manipulation, the concealment of financial problems within the company, and even the encouragement of fraud.
Changing the method of inventory valuation, for example, can add more income to the current year’s profit and loss statement, making the company appear more profitable than it is.
While IFRS requires that changes to the rules’ application be justified, it is frequently possible for companies to “invent” reasons for making the changes. Stricter regulations would ensure that all companies value their statements in the same manner.
1.2 THE PROBLEM’S STATEMENT
Several researchers investigated the impact of IFRS disclosure on organizations, and their findings revealed both the benefits and drawbacks of IFRS disclosure. Given that a country’s adoption of IFRS disclosure would have the same impact on a small business as it would on a large one.
Small businesses, on the other hand, do not have as many resources to implement changes and train employees. As a result, smaller businesses hire accountants or other outside consultants to assist with the transition. In this area, smaller businesses will bear a greater financial burden than larger ones. This study, on the other hand, will look at the impact of IFRS disclosures on organizational performance.
1.3 THE STUDY’S OBJECTIVES
The following are the study’s objectives:
To investigate the influence of IFRS disclosures on organizational performance.
To investigate the level of compliance with the IFRS disclosure principles by Nigerian companies.
To identify the issues with IFRS disclosure in Nigerian organizations.
1.4 QUESTIONS FOR RESEARCH
What effect do IFRS disclosures have on organizational performance?
What is the level of compliance of Nigerian companies with the IFRS disclosure principles?
What are the issues with IFRS disclosure in Nigerian organizations?
HYPOTHESIS 1.5
HO: There is no statistically significant link between IFRS disclosures and organizational performance.
HA: There is a strong link between IFRS disclosures and organizational performance.
1.6 THE STUDY’S SIGNIFICANCE
The following are the study’s implications:
The study’s findings will educate business managers in Nigeria about the impact (both positive and negative) of IFRS disclosure on organizational performance.
This study will contribute to the body of literature on the effect of personality traits on student academic performance, forming the empirical literature for future research in the field.
1.7 STUDY SCOPE AND LIMITATIONS
This research will look at the impact (both positive and negative) of IFRS disclosure on organizational performance in Nigeria.
STUDY LIMITATIONS
Financial constraint- Inadequate funding tends to impede the researcher’s efficiency in locating relevant materials, literature, or information, as well as in the data collection process (internet, questionnaire and interview).
Time constraint- The researcher will conduct this study alongside other academic work. As a result, the amount of time spent on research will be reduced.
REFERENCES
M. Bradshaw et al (2010). Response to the SEC’s Proposed Rule- Roadmap for U.S. Issuers’ Potential Use of Financial Statements Prepared in accordance with International Financial Reporting Standards (IFRS). Accounting Prospects (24) 1 International Accounting Standards Board (2007), International Financial Reporting Standards 2007 (including International Accounting Standards (IAS(tm)) and Interpretations as of January 1, 2007, LexisNexis, ISBN 1-4224-1813-8.
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IMPACT OF IFRS DISCLOSURES ON ORGANIZATIONAL PERFORMANCE
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