PREPARATION OF FINANCIAL STATEMENTS AND THE NIGERIAN ACCOUNTING STANDARD CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
In the past decade business environment undergoes a number of significant changes. A great evolution has taken place in the management operation and their responsibilities on meeting these dynamic changes. Financial statements are formulated by legal and regularized institutions within a country and also globally. The purpose of these statements is to enforce compliance between nations of the world and to bring international harmonization of financial reporting to bare. These statements also assist any reader in the understanding and the interpretation of financial statement and the information disclosed therein. Proponent of accounting harmonization argue that comparability of financial statement worldwide is necessary for the globalization of capital market. Financial statement comparability would make it easier for investors to evaluate potential investment in foreign securities and thereby take advantage of risk reduction made possible through international diversification. It would also simplify the evaluation by multinational companies of possible foreign take over targets from the other side with harmonization, companies could gain access to all capital market in the world with one set of financial statement. One set of universally accepted accounting standards would reduce the cost of preparing worldwide consolidated financial statement and the auditing of these statements also would be simplified.
Multi-national companies would find it easier to transfer accounting staff to other countries. In Nigeria, Statement of Accounting Standard is formulated, edited and controlled by the Nigerian Accounting Standards Board (NASB). They are the only known body to formulate accounting statements and policies and regulate the issue of financial management here in Nigeria. They work in partnership with the Government and the Institute of Chartered Accountant of Nigeria (ICAN). Due to the dynamism of today’s society management has shouldered greater responsibility in accounting for the companies they manage. One of the most accepted instruments for the measurement of management accountability and performance is the “Annual Financial Statement”.
According to Okoye (1997: 03) “Financial accounting is guided by generally accepted accounting principles or rules such as matching concept, consistency objectivity concept etc.
These rules are necessary to protect the interest of shareholder, creditors’ governors. Though some accounting scholars argue that financial accounting alone can no longer be accepted as giving an adequate picture of cooperation performance.
However, assessment of company performance still rest solely on its financial position. This is the main reason that lead to growing acceptance that corporate financial statement to a significant and paramount to the number of group both inside and outside the organization. When an organization issues a set of financial statement, its complication and propagation are expected to meet the requirement of the accounting standard of body of “rule” derived from the experience of accounting habits and practice. These rules may be found in accounting literature especially pronouncement by accounting bodies.
The preparation of these statements implies the consistent on the application of principle and methods from one period to another, the figures and supportive analysis must represent “a true and fair view” values based on objectives on measurable criteria of the assets and liabilities as well as the transactions of an entity over a particular period.
Entities responsibilities of meeting “Accounting Standard” criteria in preparing their reports pre-supposes that financial statement service several purposes and class of people.
The statements may provide information which will enable users to arrive at prudent decisions. It may also be used by management owners. Potential donors and employees as a result of serving different interest consistency in method and principles not only assures comparability of reports of one period with another but also by use of accounting standard it may be possible they compare to activities (both past and potential) of one entity with another. The Nigerian Accounting Standard Board Act 2003, enhances the validity of the statements of accounting standard by correcting the shortcomings identified by major failures such as Enron and Parmalot. The Board is charged under the Nigerian Accounting Standard Board Act 2003 to promote and enforce compliance with accounting standards developed by the Board from the perspective of the preparation of financial statement. The board has issued about 21 Statements of Accounting Standard. This work intends to analyze and examine the preparation of financial statement and the Nigerian Accounting Standards with particular emphasis on Ocean Bank.
1.2 STATEMENT OF THE PROBLEM
After a careful observation of the activities of Ocean Bank, the researcher observed the non-full compliances of internal section with the accounting standard established by Nigerian Accounting Standard Board. As a problem of Oceanic Bank which should be rectified appropriately and augustly for the purpose of growth and success of the organization. The researcher observed this problem before the researcher decided to embed on this research work. This problem observed by the researcher leads the researcher to investigate the effect of non-full compliance of Oceanic Bank with Nigerian Accounting Standard on growth and success of Oceanic bank.
1.3 RESEARCH QUESTIONS
1. What are the benefits of published financial statements?
2. What effects do the full compliance to Accounting standard have on the growth and success of any business.
3.Does the Nigerian Accounting Standard Board complies with other accounting bodies in the world such as International Accounting Standard (IAS)?
4. What are the contents of financials?
1.4 RESEARCH OBJECTIVE
1. To review the benefits of published financial statements
2. To evaluate the effect of Nigerian Accounting Standard Board on the growth and success of Oceanic Bank.
3. To ascertain the extent of compliance in the preparation and presentation of financial statement by Ocean bank with Nigerian Accounting Standard Board.
4. To identify Nigerian Accounting Standard Board compliance with other Accounting bodies for example statement of Accounting Standard and International Accounting Standard.
5. To know more about the content of financial statement.
1.5 SCOPE OF THE STUDY
The study is limited to the Nigeria Accounting Standard. The analysis when made would involve a review of the existing standard. Identification of critical analysis of the standard, modification of existing standard through recommendation and comments. The study covers a six months period from October 2004 to March 2005. Data collected will be limited to annual report and accounts 2001 of Oceanic bank.
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