The Impact Of The Adoption Of International Public Sector Accounting Standard (IPSAS) On The Quality Of Public Sector Accounting In Nigeria

Project and Seminar Material for Accountancy / Accounting

Project and Seminar Material for Accountancy / Accounting


The development of any accounting system requires consideration of the underlying purpose of that system. In Nigeria, government accounting processes have been conducted within the general framework of the principles of fund accounting but the application of these principles to financial reporting has been a major challenge. This study examined the impacts of adoption of International Public Sector Accounting Standards (IPSAS) on the quality of public sector organizations in Nigeria. Primary and Secondary sources of data were employed. ANOVA SPSS was employed. Findings from the study showed that adoption of IPSAS would improve the quality of financial reporting of public sector organizations in Nigeria. In addition, it was found that the adoption of the standard would help in curbing corruption and mismanagement in the public sector. It was concluded that IPSASs adoption would improve the performances of government enterprises. The study recommended that government should ensure full implementation and compliance with the standard in Public organizations. Therefore, the adoption of IPSAS is expected to influence the operating procedures and reporting practices of public sector organizations in Nigeria.
Keywords: IPSAS, Quality, Adoption, Impact, Public Sector

Chapter One


1.1 Background to the Study

The rate of change affecting the world of public sector managers show no sign of slowing down especially with apparent shrink in geographical boundaries among nations of the world. Because of this, governments across the world are constantly searching for ways to improve their public financial management systems. Hence, it is sine qua non for public sector managers to harness the opportunities of globalization such as access to international finance, collaboration, international markets for domestic products and grants. To harness the above, it is paramount to evolve uniform standards of financial reporting unlike in the previous years when nations of the world had only been concerned in setting financial reporting standards in their own defined territories.

The return of Nigeria to democratic governance in 1999 has been accompanied by various reforms to facilitate transparency and accountability in the governance of government activities and to improve the quality of financial information produced in public financial reporting. The decision of the Federal Executive Council to adopt IPSAS (International Public Sector Accounting Standards) of the three levels of government of Nigeria by January 1, 2016 is an important initiative that should include reporting on financial reporting. in Nigeria, the public sector is improving. IPSAS has become the cornerstone of the global public accounting revolution in response to calls for greater fiscal accountability and greater government transparency (1). IPSAS addresses issues related to the preparation of general purpose financial statements for public sector enterprises that do not refer to SOEs. Barrett (2001) described accountability as a relationship based on the obligation to provide evidence, verification and accountability for the outcome, both in terms of the results achieved in terms of agreed expectations and in terms of the resources used. In other words, the government must be accountable when it conducts its activities in an open, transparent and engaging manner (John 2011).

IPSAS has two accounting bases: cash accounting and the provisioning basis. The accounting bases for accounting are practiced in the private sector, but the introduction of the New Public Management Initiative (NPM) has made it a program to improve financial management in the public sector (Lyfee, 1993). NPM is committed to applying private sector management approaches and techniques to the public sector.

The introduction of IPSAS, including accrual accounting, should serve a number of useful purposes, such as:

  1. Improving the assessment of financial performance, as the financial statements reflect all paid and unpaid expenses and all revenues generated;
  2. Provide information on whether sources of revenue are sufficient to meet short and long-term commitments;
  3. Provide comprehensive information on expenditures that help to understand the impact of the policy on costs and allow comparison with other policies.
  4. Determine the future viability of the programs, the liquidity situation and complete information on the government’s financial position or assets and liabilities at the end of the year; and
  5. Improve good governance (Benice, 2014).

However, the achievement of the above objectives is doubtful, as several attempts have been made in the past to improve the public sector accounting system in Nigeria. Among these attempts, the federal government’s efforts to standardize federal, state and local government degrees, where a committee had been created in 1984 to harmonize the presentation of diplomas in the public sector, were important. The Committee noted the differences in explanations and formats of presentation between the reports of federal, state and local authorities and recommended 16 statements adopted by the three levels of government. Key recommendations have been adopted and implemented, but standard reporting formats have not been adopted consistently (Fedric et al., 2005).

1.2 Problem Statement

The purpose of government accounting is to determine how much money has been deposited and where it comes from, how much has been spent and for what purposes and what financial obligations have been incurred. Profit is not the objective, unlike the private sector, whose main purpose is profit and determines the profits of the enterprise over a given period. As a result, many factors influence the government’s accounting, for example: For example, the role of the government in various areas such as the armed forces, health and education, and policies mandated by the government to achieve its goals and goals. As a result, public accounting is interested in gathering information that will enable it to generate revenue and payment accounts (Ntowole, 2008). According to Smith (1999), although the operations and public accounts in Nigeria were conducted within the general framework of fund accounting rules, the absolute application of accounting principles is a major problem. Mckane (1999) proposed the use of accounting information as an additional control mechanism because of its impact on economic performance and corporate governance. Meelna (2003) estimated that the state budget and the contribution of public spending to gross domestic product are very high, especially in emerging economies. When considering the concepts and techniques used, there is a close link between the public and private sectors. In addition, emerging needs and the use of information technology in the public and private sectors have made public sector accounting an important part of accounting studies around the world. Jolena (2016) reported the impact of the level of corruption in Nigeria, that corrupt tendencies so pervaded the strata of Nigerian society that the young people who are supposed to be the leaders of tomorrow are being investigated and that Internet fraud, above all the Lagos State Commission.

1.3 Purpose of the Study

The main objective of the study is to determine the impact of the adoption of international public sector accounting standard (IPSAS) on the quality of public sector accounting in Nigeria. Specifically, the study aimed to:

  1. Determine the impact of IPSAS adoption on value relevance of Book value per share of public service in Nigeria
  2. Determine the impact of IPSAS adoption on value relevance of earningsper shareofpublic service in Nigeria.
  3. Investigate the impact of IPSAS adoption on value relevance of capitalized intangible assets of public service inNigeria
  4. Determine the incremental impact of IPSAS adoption on relevance of accounting information of listed financial firms in Nigeria.

1.4 Hypotheses of the Study

  • H01: IPSAS adoption has no significant impact on value relevance of Book value per share of public service in Nigeria.
  • H02: IPSAS adoption has no significant impact on value relevance of earnings per share of public service in Nigeria.
  • H03: IPSAS adoption has no significant impact on value relevance of capitalized intangible assets of public service in Nigeria

1.5 Significance of the Study

The study aims to help the public sector take a comprehensive approach to accounting standards. The study will also be of interest to public universities, higher education institutions, research institutes and individual researchers interested in accounting standards and will use the results for further research. This study will encourage researchers to identify the effectiveness and efficiency of the sector. The research will help individual public companies understand their position relative to the standard of their financial report.

1.6 Scope and Limitations of the Study

The study scope is limited to investigating the impact of international public sector accounting standard (IPSAS) in Nigeria public service in Lagos state civil service. Limitation faced by the research was limited time and financial constraint

1.7 Definition of Basic Terminologies


The obligation of an individual or organization to account for its activities, accept responsibility for them, and to disclose the results in a transparent manner. It also includes the responsibility for money or other entrusted property

Public sector:

The part of national economy providing basic goods or services that are either not, or cannot be, provided by the private sector. It consists of national and local governments, their agencies, and their chartered bodies. The public sector is one of the largest sectors of any economy.


A social unit of people that is structured and managed to meet a need or to pursue collective goals. All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns roles, responsibilities, and authority to carry out different tasks. Organizations are open systems–they affect and are affected by their environment.


The accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed. In a contract, performance is deemed to be the fulfillment of an obligation, in a manner that releases the performer from all liabilities under the contract.

Chapter Five

Conclusion and Recommendations

5.1 Conclusions

Based on the discussion and analysis in the preceding chapter, the study concluded that both empirical and statistical evidence on the utility of three explanatory variables of book value, earnings per share and capitalizes intangible in predicting the explained variable (share prices of the sample firm) was provided. Also, it is concluded that even though the adoption of IPSAS was mandated in order to increase the value relevance of accounting information, that mandatory adoption has been proven to enhance the relevance of book value of equity to the users of accounting information of financial service firms in Nigeria through share prices.

Secondly, this study concludes that relevance of IPSASs regarding to earnings per share has been improved after the adoption of IPSAS. This can be further explained by the fact that adoption of IPSAS has not restored the confidence of investors by influencing the share price of financial service firms in Nigeria.

Thirdly, the study provides evidence that value relevance of capitalised intangible assets has been improved after the adoption of IPSAS. This can be explained by the fact that the mandatory adoption has enhanced the investors need by influencing the share price of financial service firm inNigeria.

Lastly, IPSAS adoption reflect more value relevant information on accounting information which is beyond that of pre IPSAS adoption period through the share prices of public service in Nigeria.

5.2 Recommendations

In line with the findings and conclusions of the study the following recommendations are proffered:

  1. Statistical evidence revealed that book value per share has conveyed useful information to the market share price of the public service after the adoption of IPSAS. Therefore, management should pay more attention to IPSAS by ensure adequate compliance. This can be achieved by strengthening internal control unit in the organization to ensure that every aspect of accounting processes undergone a holistic check of IPSAS compliance checklists. Similarly, potential and existence investors should give priority investment wise, to the company that adopts IPSAS fully as shown statistically that the said standards influence the share prices through book values of equity.
  2. Statistical evidence proved that capitalized intangible asset has impact on share price of Nigeria public service after IPSAS adoption period. Therefore, management should capitalize their intangible assets because they have significant impact on market share price. Also the Standard setters should therefore ensure adequate adherence to the IAS 38 which prescribe how intangible assets should be capitalized, expensed, amortized or impaired. Managers should ensure that more intangible capital should be present in their financialstatement.
  3. Financial reporting council and other regulatory agency should ensure the strict adherence of IPSAS. Because the adoption of the standard is proved to have an incremental value relevance on accounting information of public service in Nigeria.

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