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ABSTRACT
This work examines the impact of the accounting flexibility offered by IFRS before the 2012 mandatory adoption of IFRS in Nigeria. Same year differences between IFRS and SAS (Local GAAP) reported amounts are used on a sample of five voluntary IFRS reporting banks in Nigeria to determine the nature and extent of the changes on PBT and some income statement items. It uses the yearly differences for a period of eight years to ascertain how Nigerian Banks used the choices that are available under IFRS in managing earnings. The study assesses the impact of those choices on the PBT. Using descriptive statistics and regression analysis, the results disclosed that IFRS adopters did not present different earnings behaviours when reporting under IFRS from when reporting under SAS, but reported higher PBT amounts under IFRS. This indicates, specifically increased earnings discretion, and in general shows that reports under IFRS do not necessarily reflect higher quality of earnings, consistent with the researcher’s expectation that abnormal IFRS adjustments will result in lower earnings quality.
Earnings quality was measured in terms of the changes in accounting amounts and timeliness of (loan) loss recognition. SAS and IFRS performed similarly on PBT but with regard to timely loss recognition using Loan Loss Provision (LLP), the result suggests superiority of SAS, implying delayed communication of future expected losses under IFRS. The study revealed rising trend on NII and NFI and PC. Anomalies were observed on LLP under IFRS that bordered on absence of uniform credit risk rating models. The study then recommends that because the objectives of bank regulation differ from those of financial reporting, the CBN should continue to issue policies that will ensure security of the depositors fund in the banking sector of Nigerian economy under the IFRS era.
