The Extent Of Compliance To Accounting Standard In The Preparation Of Financial Statement

Project and Seminar Material for Accountancy / Accounting

The Extent Of Compliance To Accounting Standard In The Preparation Of Financial Statement

Chapter One


1.1 Background of the Study

The introduction of accounting standard and worldwide by the various professional accountancy bodies has tried to solve the problem of non-uniformity in financial statement and also the acceptance of financial statement by the standardization.

The need for accounting standard in Nigeria to suit our local, political, legal and economic environment has bee recognized long, particularly during the indigenization period. Government ministries, departments, and regulatory public have for many years demanded for uniformity in the recording of accounting transaction.

It is the researcher’s opinion that by the end of this study, the attempts made to standardize financial statement as well as their merit and demerit would be highlighted.

It is also necessary to say that accounting standard board whether statement of accounting standard (SAS) issued by the Nigeria accounting standard board of the standard accounting practices (SSAP) have a great impact on the level of relevance placed on financial statement and the accounting profession as a whole. Cognizance should be taken of the fact that accounting standard by various accounting bodies have a persuasive effect outside the committees’ boundaries. A chartered accountant in Nigeria may be forced to comply with the standard set by Britain, America or any other country on his Nigeria Based client company-prior to the promulgation of Nigeria. Enterprises promotion decree 1977 when most of the publicity quoted Nigeria companies was foreign controlled. It was easy to persuade the local government to comply with the.

1.2 Statement of the Problem

There are several problems that are faced in the appraisal of accounting system of multinational company operations some of them are:

  1. The conflict and difficulties induced by different national accounting standard and practices.
  2. The problem of adjusting financial statements to reflect the various level of inflation on different countries.
  3. The deficiency in the consolidation of the financial statement of foreign subsidiaries and its regulative effect on the multinational settings.
  4. The problem of determine the total return form a multinational setting.
  5. The problem involved foreign exchange translation into the accounting system of multinational companies.
  6. Internalization of some technical accounting standard.

1.3 Significance of the Problem

This study will be useful to all financial statement of bank as this research will enable the current and prospective user of financial statement, both external and internal users be acquainted with the knowledge of analytical tool in making decision. Serve as relevant guide for future researchers in the area of the of the user of financial statement. Help to supplement the existing knowledge of users of financial ratios as a guide toward determine the banks achievement as well as to show how financial ratio analysis can identify this strength and weakness of the bank both a day and in the future.

It enable the intending investors who are not well raised in accounting to be able to appreciate how to critically evaluate financial statement or organization of interest to them before making investment decision.

The Hypothesis to Test
  • Ho Accounting standard does not have effect on financial statements.
  • H1 Accounting statements not have effect on financial statements.

1.4 Research Question

The research will be

  1. What is accounting standard?
  2. What is financial statement?
  3. What are benefits of accounting standards?
  4. How does accounting standard affect the preparation of financial statement.
Indigenization programmed in 1978.

In order to facilitate easy consolidation of financial results the same accounting policies are now readopted by both of the present and subsidiary companies, for the purpose of this project, statement of accounting standard (SAS) well be used in the following categories!

1. Additional Disclosure:

Some standard requires information be provided which is not required by law in such category fall SAS2 and SAS6 which requires companies to publish financial date / financial reporting found in financial statement. Added to deal with ordinary items and to take care of prior adjustment.

2. Specification of Appropriate Method of Valuation:

In this category such standard tell the accountant and manager how to annivota current figure for the purpose of inclusion in the profit / loss, balance sheet in the account e.g. SAS4, SAS9 and so on. It is in fact use categories that have pronounced most discussion and criticisms.

1.5 Objectives of the Study.

This study is aimed at determining the extent of compliance to an accounting standard in the preparation of financial statement. Accounting standard are to be taken into cognizance and unlike auditing guidelines which may provide a guide.

Accounting standard are to be observed in understand by all users. Financial statement are therefore the means of communicating for instead meaningful information must be presented information recommended in the SAS2, it is expected to be the best practices in Nigeria.

Information to be Disclosed in Financial Statement SAS2

In any company, these are many accounting information that will assist to access the financial liquidity profitability and viability of reporting entity.

The financial statement of a reporting company should include the following.

  1. Accounting information: these are data that are found in financial statement.
  2. Balance sheet: show the assets, liabilities and properties interest at a point in time.
  3. Others are: profit and loss account or income statement notes on the account statement of source and application of funds, valve added statement and five years financial summary.

1.6 Limitation of the Study

By implication, this study untended to look at the nature of financial statement in Nigeria in order to verify and ascertain whether what is analyzed in the theory is actually put in practice in use of financial statement overtime through the study tries to determine variance between actual performance and stated standards but because of financial constraint and time factors will be a limitation to this study since most of manufacturing company apply the SAS to suit the purpose and the adherent to the SAS is not strong as we have in the theory.

Preparation of financial statement and where in any circumstances, it is not being complied with then the financial statement that does not company with a particular standard should be disclosed in the financial statement and the extent of its non-compliance should ne noted.

The stuffy is also aimed at determining the attempt made by professional bodies to standardize financial accounting reports / statements. The improvement without considering the impact of accounting standards in information contained in financial statement.

1.7 Scope Of the Study

In this research, due to and financial resources constraints, the researcher strategically selected six out of the eighteen as for the study. The need for individual area chosen may be briefly presented as follows.

SAS1: Disclosure of Accounting Policies

Financial statements are prepared for various users and there are more than one accounting treatment of financial transaction: there, the proper evaluation of accounting information by the users, it is very paramount that accounting policies adopted in such preparation must be disclosed.

SAS2: Information To be Disclosed in the Financial Statement

Accounting information about a business entry or enterprises. Requires a variety at users. This need dictates the fundamental objectives of accounting and makes reporting information in the financial statement information.
The information in the financial statement are therefore expected to be simple, clear and easy to

1.8 Definition of Terms

The researcher has identified the most suitable SAS as far as the study is concerned it is fundamental to be defined are:

Accounting Policies:

Accounting policies are the specific accounting based selected and consistently followed by a business enterprise in reporting

Financial Statement:

Financial statement are prepared under the historical cost convention except for certain fixed assets which are professionally valued.


Depreciation of fixed assets to calculate to write off their cost, its expected useful life.


Investment is an act of keeping founds for the realization of profits in the future business operations, most of their resources are used to acquiring assets, to be held for capital to appreciation incomes generation or for the purpose of securing trading advantages.

Property or Plant Equipment:

Generally, they are referred to as fixed assets and those tangible resources of an enterprise which are employed in its operations.


In Nigeria, is an attractive means of financial acquistion and used for fixed assets.


An influential sector of the economy and its being used for keeping valuable things and it play a major roles in maintaining confidence in the monetary system.

Accounting Period:

Refers to the time span usually one year, covered by financial statement.

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary

The purpose of the study is to look into bank during policies and its impact in Nigeria economy. Findings have shown that the high rate of interest normally discourages the potential investor and that has led to the following problems in the nation’s economy.

As a result of high landing rate, there has been a high price of commodities which has made it impossible for consumers to buy essential commodities. Also, the lending rate has led to mass retrenchment since companies cannot finance most of their capital budget even some companies finally-wind-up and has led to the strong of locally manufactured goods which has finally led to shortages of essential commodities in our market.

5.2 Conclusion

The general conclusion which comes out of the work is that money supply any given point in time is the result of portfolio adjustment of Nigeria economy. The central bank, the banks, the non-bank institution, the policy makers and the public.

It is clear from the above chapters that effective lending is more important than simply sitting in the armchair and dis-strong out money if we want to boost and improve our economy. It will involved an environmental analysis of the economy development and policy objectives of the government.

It also involves a through appraisal of the proposition including and analysis of the financial statement and analysis of the security to be offered and of management competence. These should equip the banker with principles and techniques for effective lending but to would be most if he does not regard them as mere guidelines which have serious limitation.

Lending to highly subjective phenomenon in the final analysis, it depends on the judgment of the lender. In making final judgment, his lender should review all techniques, principles and project analysis, the whole character and prospects of the borrower.

Effective lending policy is that which maximize profitability customer and the economy. It is the desired of most business organization both small, medium and large scale to continue in operation existence and expand the lending rate personal guarantee for collateral security, financial advices variation in lending policies and unnecessary bureaucracy has been serving as constraints for effective lending policies. As a result; it has affected the economy of Nigeria adversary.

5.3 Recommendations

In view of the above project, in the course of this research into accounting standards and its impact of financial statement. It is necessary to make recommendations which are meant to find solution to be identified problems:

  1. The accounting bodies persuade users of the standard to adhere to the legislative enactment which in our views land condense to adherence to the standards. This has already been done by companies and allied matter decree 1990 (CAMA 1990)
  2. Dogmatic application by accountant should use their initiative when auditing or preparing financial statement, for example, such information which the standard does not require disclosure maybe disclosed if found that the disclosures useful.
  3. While reviewing the Nigeria company’s acts, opportunity should be used to effects legal backing to the accounting standard and illustrate appendices inserted for the purposes of providing general guidance.
  4. The various regulation accounting bodies should endeavor to increase the degree of flexibility in some standard in as much as we believed that financial accounting statement should not be placed in a straight degree of flexibility which should be increased.

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