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A Comparative Analysis of the Public and Private Sector's Financial Reporting Practices in Nigeria

A Comparative Analysis of the Public and Private Sector's Financial Reporting Practices in Nigeria

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BAYERO UNIVERSITY, KANO.

FINANCIAL REPORTING
A Comparative Analysis of the Public and Private Sectors Financial Reporting Practices in Nigeria

OLUSEGUN OLOWU AMOS

11

A COMPARATIVE ANALYSIS OF THE PUBLIC AND PRVATE SECTORS FINANCIAL REPORTING PRACTICES IN NIGERIA

BY

OLUSEGUN OLOWU AMOS SMS/06/ACC/04040

BEING A RESEARCH WORK SUBMITTED TO THE DEPARTMENT OF ACCOUNTING, BAYERO UNIVERSITY KANO, IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF BACHELOR OF SCIENCE (B.sc) IN ACCOUNTING

FEBRUARY, 2011

2 A comparative analysis of the public and private sectors financial reporting practices in Nigeria

APPROVAL PAGE This project title “A Comparative Analysis of the Public and Private Sector Financial Reporting Practices in Nigeria” has been carefully read and approved as adequate in scope and contents for acceptance in partial fulfilment of the requirements for the award of a Bachelor of Science (B.sc) Degree of Bayero University, Kano Nigeria.

PROJECT SUPERVISOR PROF. KABIRU ISA DANDAGO

DATE

PROJECT COORDINATOR DR JUNAIDU MUHAMMAD KURAWA

DATE

HEAD OF DEPARTMENT DR BASHIR TIJJANI

DATE

3 A comparative analysis of the public and private sectors financial reporting practices in Nigeria

DEDICATION This research is dedicated to God Almighty who has seen me through the course of my studies. And also to my beloved mother who in all she could contributed generously towards the successful completion of this program and who pioneered my enrolment to acquire western education. 4 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .

DECLARATION I hereby declare that this project title “a comparative analysis of the public and private sectors financial reporting practices in Nigeria” is solely a handiwork of my effort and has been submitted to the Department of Accounting. Bayero University Kano for the award of Bachelor of Science (B. OLUSEGUN OLOWU AMOS SMS/06/ACC/04040 DATE 5 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .sc) Degree in accounting.

a woman of virtue and uprightness. May God increase you abundantly and bless you in all your ways. your prayers and support has made me. DORIS COMFORT OLOWU and YETUDE OLOWU. my two other elder sisters. I want to say thank you to the rest members of my family. your contributions will never be forgotten. To God be the glory great things he hath done. My appreciation again goes to my supervisor. My utmost vote of thanks goes to God Almighty. To MALLAM ISHAQ ISMAIL. for without God. And also to HAJIYA HANNATU SABO 6 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . without you I wouldn’t have come this far. to Him alone all glory. I owe vote of thanks. and my elder brother. I cannot brush things over without acknowledging the effort of my former level coordinator Mallam HASSAN ZUBEIRU. Mr. and the firmament showed his handiwork. THANK YOU SIR. Words alone cannot quantify how much you mean to me. Prof. for your guidance at the early stages of this project. May God in his mercies reward you and bless you.ACKNOWLEDGEMENT The heavens declare the glory of God. morally and spiritually. Father I love you. MRS GRACE OMOKORE for her tremendous encouragement and support – financially. I say THANK YOU. honour and adoration be ascribed unto. Mother. the maker of heavens and the earth. there wouldn’t have been this work. My special thanks also goes’ to my beloved mother. I want to say big THANK YOU to. KABIRU ISA DANDAGO who has in everything made tremendous impetus towards the successful completion of this project. a mother of five. I truly appreciate all that you have done. AYODEJI MICHAEL OLOWU for all their supports and encouragement. and thank you. MRS JANET OLOWU. I also want to show my appreciation to my dear Father. and make you live to enjoy the fruits of your labour. to you sir. I just want to say big THANK YOU. Words alone cannot show my deepest appreciation to the Lord. Daddy you are the best. AMOS AKINOLA OLOWU. I will not but acknowledge the effort of my beloved elder sister. how lucky I am having a father like you.

AHMED and MALLAM B. SIKIRU OLAIYA SALAUDEEN.B IBRAHIM for their assistance. 7 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . May God in his riches and glory continue to favour you all in your doings. And to all of my friends and course mates. I just want to say THANK YOU to you all. My appreciations as well goes to my friends. space may not permit me to start mentioning all of you one after the other. but i truly appreciate all of you and i say THANK YOU. NURUDEEN MUSA MASHI and UZOCHUKWU JOSHUA OJUKWU. you guys are close to my heart and dear to me.

the Bank and Other Financial Institutions Act (BOFIA) and relevant CBN circulars.ABSTRACT Financial reporting has been the order of the day in the financial spheres in recent times. 8 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . This study sought to do a comparative analysis of the public and private sectors financial reporting practices in Nigeria.e. i. Some companies were found to have adopted the International Financial Reporting Standards (IFRSs) in a bid to further strengthen the corporate governance standards and enhance transparency and disclosure in financial reports. some listed companies contravened some of the provisions of the Banks and Other Financial Institution Act (BOFIA). however. financial statements are prepared in accordance with the statement of accounting standards which is applicable in Nigeria and in manner required by the Companies and Allied Matters Act. The study found out that. Whereas some public entities adhere to the provisions of the Statement of Accounting Standards (SASs) in the preparation of financial statements. It is a means of communicating the performances of enterprises to all those who have stakes in the organizations. At some specific years. In the private sector. The study has adopted the descriptive analysis to come up with a powerful analysis of the both sectors’ financial reporting practices. for every one public sector enterprise that uses cash base accounting system. there is equally one public sector entity using the accrual base accounting system). others comply with the provisions of the International Public Sector Accounting Standards (IPSASs). government institution use both the cash base and accrual base accounting systems in reporting financial information (the ratio of usage found by this study in the public sector is to a 1:1 bases.

5 1.2.3 1.2 1.2.1 2.2.1 1.TABLE OF CONTENTS Pages Title page Approval page Dedication Declaration Acknowledgement Abstract i ii iii iv v vii CHAPTER ONE INTRODUCTION 1.7 1.1 2.4 1.3 Introduction Conceptual Framework of Financial Reporting The concept of financial reporting The concept of financial statements Users of financial statements 12 12 12 14 15 9 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .8 Background to the Study Statement of the Problem Objectives of the Study Research Questions Significance of the Study The Scope of the Study Limitations of the Study Definitions of key Terms 1 4 6 6 7 8 9 10 CHAPTER TWO CONCEPTUAL FRAMEWORK AND LITERATURE REVIEW 2.6 1.2 2.2 2.

3 3.5 Introduction The Population of the Study Sample Size and Sampling Techniques Sources and Methods of Data Collection Method Data Presentation and Analysis 34 34 34 35 36 CHAPTER FOUR DATA PRESENTATION.5 Generally Accepted Accounting Principles (GAAP) Public Sector Financial Reporting in Nigeria Legal framework of government in Nigeria Objectives of government accounting Global trend in public sector financial reporting Private Sector Financial Reporting in Nigeria Objectives of private sector financial reporting The regulatory aspect of the private sector financial reporting in Nigeria The Companies and Allied Matters Act Statement of Accounting Standards International Financial Reporting Standards 15 17 20 23 25 26 27 27 29 31 31 CHAPTER THREE METHODOLOGY 3.5.5.5.1 2.5.3 Analysis of Administered Questionnaires Aligning public sector financial reporting practices in Nigeria Assessment of Financial Reporting Practices in Nigeria The Need to Adopt International Financial Reporting Standards 37 38 41 43 CHAPTER FIVE 10 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .2 3.3 2.4.4 2.3 2.2.4.3 4.3 2.2 2. ANALYSIS AND INTERPRETATION 4.1 2.2 2.4 2.4.5 2.5.2 4.4 3.1 4.1 3.

CONCLUSIONS AND RECOMMENDATIONS 5.2 5.3 Summary Conclusion Recommendations 47 48 49 50 BIBLIOGRAPHY 11 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .SUMMARY.1 5.

the public sector has its own debates raging on the adoption of a universal public sector accounting standard and a shift to accrual basis of accounting. 2009. often identified with its actual and potential claimants. both within a country and among countries. Financial reporting and international accounting standards are hot topics at the moment. through which an enterprise conveys information about its financial performance and condition to external users. 12 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .1 BACKGROUND TO THE STUDY It is an undisputable fact that the major aim of financial reporting is the conveyance of relevant information useful to the various categories of users of such information. Whatever the case. However. Most of the focus has been on the private sector and the fall-out from the massive commercial collapses that have recently occurred. Financial reporting is often used as an umbrella term to cover both financial statements themselves and the additional types of information. An important component of the information system of an economy is financial reporting.CHAPTER ONE INTRODUCTION 1. Most people by now accept that it is desirable for accounting standards to be harmonized for both public and private sectors as much as possible around the world. Financial reports must be clear and understandable. They are based on accounting policies which vary from enterprise to enterprise.31). accounting should contain facts that are comprehensible to those who have a reasonable understanding of business economic activities and willing to study the information with reasonable diligence. But there is no unanimous agreement on which standards and basis to be used as a benchmark or how similar public sector accounting concepts and standards should be to their private sector counterparts (Ado. p.

These factors. compliance. Prof. their basis of accounting is different from that of the private sector. 9.1). the cash basis of accounting has been a factor of money laundering. the accounting and auditing practices in Nigeria suffer from institutional weaknesses in regulation. p. argues that. as well as poor accounting education and training.12). including differential financial reporting requirements for small companies in Nigeria. And that. however with some exceptions. 2004). According to an assessment of accounting and auditing environment in Nigeria conducted by the World Bank in 2004. Thus. 2006. issued 30 standards – known as Statements of Accounting Standards (SASs). have contributed to weaknesses of the financial reporting regime (Nigeria – Accounting and Auditing ROSC. although Nigerian Statement of Accounting Standards (SASs) have been developed based on the International Financial Reporting Standards (IFRSs). however. 2010. and auditing requirements of companies. with cash accounting system the complete picture and real financial 13 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . SAS have not been reviewed or updated in line with current IFRS. Compliance with more lenient national accounting standards is achieved. financial reporting. p. and in many cases there are no equivalent SAS to current IFRS. The president of the Institute of Chartered Accountants of Nigeria (ICAN). Owuama in a news report dated Sept. and have different sources of finance (Adams. 2004. Financial reporting in the public sector is mostly based on the cash-based accounting system. and enforcement of standards and rules (World Bank and International Monetary Fund. terrorism financing and corruption. comparison between the financial performance of the public sector and that of the private are difficult to make because the public sector organizations are multi-purpose. The body that has the primary responsibility of regulating financial reporting practices in the private sector in Nigeria is the Nigerian Accounting Standard Board (NASB) and has to date (from 1982 – 2010). Report on the Observance of Standards and Codes Accounting and Auditing.There are laws and bodies for the regulation of accounting.

Public sector financial reporting is regulated by the International Public Sector Financial Reporting Standards (IPSASs) issued by the International Public Sector Accounting Standards Board (IPSASB) of International Federation of Accountants (IFAC).position of the nation are often unknown at any particular point in time (African Newspaper of Nigeria. which stipulates the requirement for the formation/registration of companies. Companies in Nigeria prepare financial statements on the accrual basis of accounting. Financial reporting in the public sector is regulated by the Constitution of the Federal Republic of Nigeria 1999 as amended. Audit Ordinance Act of 1956. 2000). In Nigeria. In addition to CAMA 1990. financial statements (perhaps at the federal level) are prepared by the Accountant-General of the federation (or of the state. as the case may be) based on the prescription of the Minister/Commissioner for Finance. there is no body responsible for issuing standards for public sector financial reporting. Hence. other statutes have been enacted by government to 14 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . It requires that financial statements comply with the Statement of Accounting Standards (SAS) issued by the Nigerian Accounting Standards Board (NASB) and that the audit be carried out in accordance with generally accepted auditing standards. 2010). how the life of companies may be brought to an end. 9. and so on. the Finance (Control and Management Act) of 1958. the type of accounting records and financial statements that is required of companies. The main legal framework for corporate accounting is the Companies and Allied Matters Act (CAMA) 1990. how companies are to conduct their affairs. Sept. and Financial Regulations issued from time to time by the Minister for Finance (Anyafo.

The National Insurance Commission regulates financial reporting practices of insurance companies under the Nigerian Insurance Act of 2003 (Nigeria – Accounting and Auditing ROSC. financial information users and other stakeholders needs to be abreast of the progress of their various stakes.2 STATEMENT OF THE PROBLEM Financial statements are prepared in accordance with the Statements of Accounting Standards (SASs) which are based on the International Financial Reporting Standards (IFRSs). The Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange regulate financial reporting and disclosures by listed companies on the Nigerian Stock Exchange Market. The study will enable the local standard setting body to better focus on the adoption of the International Financial Reporting Standard (IFRS) to regulate financial reporting practices and to ease global financial information uses. a review of published financial statements in Nigeria. thus. Besides this. Despite the current trends in financial reporting systems. differences exist. The Central Bank of Nigeria is the main statutory regulator of banks and nonbanking financial institutions under the terms of the Banks and Other Financial Institutions Act (1991). initiated by the World Bank and the 15 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . enable managers in the public sector to measure their performances using private sector models. 2004). either in the public or the private sector. This will. the intent of this study is to compare public sector and private sector financial reporting practices in Nigeria. they have not been updated to conform with the revisions made to IFRSs. culminating into the adoption of the IPSASs in the Nigerian public sector. 2004) However. Although SASs issued by the Nigerian Accounting Standards Board (NASB) are based on IFRSs.govern economic activities in specialized areas of the Nigerian economy (Nigeria – Accounting and Auditing ROSC. perhaps. however. 1. and do not cover some accounting areas.

thus culminating into noncompliance with the SASs in Nigeria (Nigeria – Accounting and Auditing ROSC. terrorism financing and corruption. and its establishment has been argued by some interests to be a factor used for fraud perpetration. The need to review financial reporting system in the Nigerian public sector has been a pressing issue for many years now. the usefulness of the accrual-based financial information is still the subject of ongoing debate in the Nigerian public sector. Aruwa (2004) opines that the use of the cash-based accounting system in the Nigerian public sector in presenting economic information is fundamentally flawed. More so. the accrual accounting provides for a better perspective of performance management of public funds and presents a more complete basis for assessment of the financial performance of activities.International Monetary Fund in 2004 revealed some compliance gaps. polluted public officers who already have 16 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . meaning there are differences between local accounting standards and actual practices in the private sector. comparison of performance is mostly not possible in the public sector using private sector models – since the private sectors use accrual basis of accounting while the public sector mostly uses the cash basis. money laundering. hence. 2004). as this will leave Nigeria backward in terms of global practices. Ngwu (1999) also argues that the cash basis accounting system is inadequate for good financial management. The resultant consequences of insisting on the cash basis of accounting in the public sector will perhaps retard the economy’s financial reporting system. And also. there is the need for a transition from cash accounting to accrual accounting in the public sector. Secondly. this is with a view to align the system with global best practices. Henceforth.

b. 17 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . in the process of presenting economic information to users and other stakeholders.4 RESEARCH QUESTIONS This study has sought to do a comparative analysis of the public and private sectors financial reporting practices in Nigeria and has been guided by the following research questions to help facilitate the attainment of the research objectives. Likewise in the private sector. what will be evident is lack of confidence in the financial statements of local companies by international investors who may want diversify their investment portfolios. The specific objectives the study seeks to achieve are: a.3 OBJECTIVES OF THE STUDY The aim of this study is to compare financial reporting practices in the private and public sectors in Nigeria. To assess the financial reporting practices of private sector companies and public sector entities as against the generally acceptable accounting principles. To find out how public sector financial reporting practices in Nigeria could align with global best practices.the intention of looting public money will be having more edge to do just that which they have purported. 1. 1. c. To explain and re-emphasize on the need for adopting IFRSs and the accrual-based accounting system in the Nigerian public sector. comparability may not be feasible if the IFRS is not fully adopted by both the public and private sector organizations in preparing their financial statements.

Accountants: public sector accountants and private sector accountants will benefit from this study. managers in the public sector. 18 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . which is hoped to bring about international investors from all over the countries of the world to operate in the Nigerian market.a. Could financial reporting in the Nigerian public sector be aligned with global best practices? b. and standard setters. Are there needs to adopt the IFRSs and IPSASs accrual-based accounting system for financial reporting by both companies and state owned entities in Nigeria? 1. Do private and public corporations in Nigeria comply with set standards and pronouncements (GAAPs) in reporting financial information? c. prospective international and local investors in both sectors. the need to adhere strictly with the application of these standards in practice. future researchers. Investors and Stakeholders in both sectors: this study will somehow emphasize on the need to have a universal accounting standards. The study purports to benefit accountants preparing financial statements in both the private and public sectors. because the study will bring a better understanding of the need to have uniform global accounting standards which will perhaps make them global accountants. Managers in public sector: this study seeks to create an environment where public sector managers will be able to evaluate and compare their performances using private sector models as basis for comparison.5 SIGNIFICANCE OF THE STUDY The significance of this study has slightly been enumerated in the background to the work. It will also help them appreciate better.

a period of three (3) years. 19 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . the findings of this study should be a springboard for them. and how those of privately owned organisations are equally conveyed to their stakeholders.6 THE SCOPE OF THE STUDY The study will be restricted to the comparative analysis of the public and private sector financial reporting practices in Nigeria.e. the focus of this research is on how financial performances of government entities are disseminated to those interested in the way the entities are managed. For the purpose of this study. i. and towards visualizing the NASB’s objectives of 2012 – that is. There are quite a number of problems surrounding financial reporting practices in both sectors of the Nigerian economy. considerable exertions will be made to address these problems. Henceforth. While other medium companies as well as small enterprises will join the train through time. interested in accounting and reporting practices and responsible for establishing financial reporting requirements will also benefit from this study in a way that will ensure quick adoption of IFRSs. State Governments and Local Governments in Nigeria. Standard setting agencies – like the Nigerian Accounting Standard Board (NASB) – Federal Government. will be considered. 1. towards ensuring that all quoted companies in Nigeria and other significant public interest entities that are yet to be quoted. to see whether or not reporting practices has been in compliance with stipulated standards and requirements for the periods chosen. from 2007 to 2009. hopefully by 2014. will fully converge to the application of the IFRS. in order to evaluate the financial reporting practices of companies and organizations both in the public and private sectors.Future Researchers: the research is to be of better use to further researchers who may want to conduct further studies on financial reporting practices in either the public or private sectors in Nigeria. but can cope with IFRS.

due to confidentiality. and not a commissioned one. the risk that the respondents will not disclose all information required. try sourcing for funds from parents. research projects are funded by research institutions.8 DEFINITION OF KEY TERMS 20 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .7 LIMITATIONS OF THE STUDY This study is likely to encounter funding problem. However. Since questionnaires will be sent via emails. or the fair that the researcher wants to use the information for reasons harmful to the organization. and cost of posting questionnaires to respondents. 1. governmental agencies and many other non-governmental organizations – a good example are World Bank. the cost involve could discourage an in-depth comparative analysis of public and private sectors financial reporting practices in Nigeria. even with all these constraining factors. the possibility that not all questionnaires sent will be received. brothers and relatives for meeting other costs involved. is inevitable. making provisions for those questionnaires that may probably bounce. corporate organisations. And where they are so answered. scheduling online meeting with respondents where interview is necessary. journals as well as other authoritative documents.1. These costs range from cost of transportation to gather data (both primary and secondary) from the targeted subjects – since most companies’ Head Offices are not situated in Kano state. In this case. Another limitation that could confront this study is lack of adequate data. these projects are commissioned projects. the researcher will resort to using the internet for sending the questionnaires via email to the respondents. cost of assessing online articles. A research of this kind demands much to be invested. International Monetary Fund (IMF) etc. but since this study is an academic research. Most at times. the researcher will increase the sample size of the work. In some cases.

Accounting Policies: Accounting policies are specific bases used by a particular business and regarded as appropriate to the circumstances of the business and suitable for the fair presentation of its results and financial position. 21 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . IFRS: international financial reporting standards (IFRS). and expenditures recorded only when cash is paid. usually annually. which are set of accounting standards developed by the International Accounting Standard Board (ISAB) that is becoming the global standard for the preparation of public companies financial statements.Accounting period: this is a period for which a company prepares its account showing the financial position and results of operations of the company as at that particular point in time. Cash-Based accounting: an accounting basis under which revenue are recorded only when cash is received. semi-annually or quarterly. Financial reporting: financial reporting is a process whereby an entity prepares and communicates economic information about the affairs of the entity for a particular period of time. irrespective of the fact that the transaction leading to the receipt or payment of cash now may have occurred in previous accounting period. Accrual based accounting: this is an accounting basis under which revenue are recorded when earned and expenditures are recorded as the result in liabilities is known or when benefits are received notwithstanding the fact that the receipt or payment of cash could take place wholly or partly in another accounting period.

22 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .SASs: these are set of accounting standards issued by the Nigerian Accounting Standard Board (NASB) from time to time to govern and regulate financial reporting practices by all companies registered in Nigeria.

The chapter also reviewed related empirical literature.1 CONCEPTUAL FRAMEWORK OF FINANCIAL REPORTING The Concept of Financial Reporting: Financial reporting.155). Anumaka further argues that financial reporting is to a large extent a studied assessment of the operational 23 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .CHAPTER TWO CONCEPTUAL FRAMEWORK AND LITERATURE REVIEW 2. p. It examined financial reporting in the corporate and public sector: and makes conclusion on the reviews done so far.2. 2007.1 INTRODUCTION This chapter deals with the review of related conceptual literature on financial reporting. Financial reporting is the process that creates stewardship assertions in the form of financial and non-financial business information statements reflecting the results of activities and transactions of an entity for a period of time (Anumaka. It is often believed to be precise and factual in its contents and. 2. studies that have been conducted in the area of financial reporting. to enable them make informed decisions and judgements about the performances of the reporting entity.2 2. the predominant occupation of the accounting profession is the process through which information about organizational performance and financial position is presented to the users. attested to by external person(s) (Independent Auditors) confirming its validity (Kantudu and Atabs. financial reporting is a process of disseminating information about the activities of an enterprise to the users of the information. these studies reveal that actual reporting practices in most organizations do not always comply with the set standards. 2010). many of which suggest that.

performance of an entity expressed in financial terms to reflect the economic exercise of fiduciary obligation. accounting has been defined as the process of identifying. performance and importantly. The process which culminates into preparation and presentation of financial reports relative to the enterprise as a whole. risk profile of firms to all potential users. Kieso and Weygandt (1980) defies financial reporting as that branch of accounting which focuses on the general purpose report on the financial position and results of operations known as financial statements. “financial reporting covers the mechanism for providing information about the financial condition. 1978). Kieso and Weygandt (1980) state that the principal means of communicating financial information to those outside an enterprise are the financial statements. Financial reporting essentially involves the preparation and issuing of financial statements. The financial statements most frequently provided are the balance sheet. therefore one of the most basic elements of the financial infrastructure”. the income statement of changes in financial position.56). These are formal records of financial activities of entities showing their financial 24 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . for use by parties both external and internal to the enterprise. It is. Similarly. According to Crockett (1996: p. measuring and communicating socio-economic information to permit informed judgements and decisions by the user of the information (Glautier and Underdown. and statement of changes in stockholders’ equity with corresponding appropriate footnotes disclosures. is referred to as financial reporting. which provide a continual history quantified in money terms of economic activities that change these resources and obligations.

financial analysts. labour unions. Each of these groups supplies money to the business or has some other interest in the company’s financial activities (Meigs et.al.al. much of the company’s financial information also is distributed to people outside of the organization. profitability. but no limits are provided on a number of elements of financial reporting that one may include in financial statements. In the United States and most other industrialized countries. However. and the general public – even the company’s competitors. Financial statements are defined to be a subset of financial reporting. The basic purpose of financial statements is to assist users in evaluating the financial position. publicly owned corporations are required by law to make much of their financial information “public” – that is available to everyone.condition for a given period of time. They are usually expected to comply with regulatory and professional requirements.2. 2. These countries also have enacted laws to ensure that the public information provided by these companies reliable and complete (Meigs et. 25 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . and future prospects of the reporting entity. These “outsiders” may include investors. 1996). The process of supplying general-purpose financial information to people outside the organization is termed financial reporting. on the level of accuracy and reliability of the statements. creditors. The degree of the usefulness of the financial statements as a tool for such assessment is dependent to a great extent.2 The Concept of Financial Statements: Financial statements serve as a means for assessing management's performance in terms of how efficient and effective or otherwise it had used available resources in the course of trying to achieve set goals. All of the accounting information developed within an organization is available to management. Dopuch and Sunder (1980). 1996).

Meigs et.al (1996) suggest that, the principal means of reporting general-purpose financial information to persons outside a business organization is a set of accounting reports called financial statements. The persons receiving these reports are termed the users of the financial statements. 2.2.3 Users of the Financial Statements: The list of users of financial statements is

inexhaustive. Each group examines the financial statements based on areas of their needs. The basic users include shareholders, board & management, regulatory authorities, creditors, suppliers, financial Analysts, researchers, prospective investors, etc. The users mentioned above are skewed towards the private sector. In the public sector they include executives (such as president of the country and state governors) and their advisers, top administrators of governments, the civil service union, the national assembly, government other than the reporting government, foreign financial and non-financial institutions – such as the International Monetary Fund (IMF) and World Bank, UN and UNESCO etc. These users expect the financial statements to contain information that would enable them among other things evaluate the performance and earning power of a business enterprise, compare its performance over time or with other enterprises within the industry, predict its future performance and continuity to enable them make investment decisions etc (Omorokpe, 2006: p.5). 2.3 GENRALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) In deciding where to invest limited resources investors and creditors often compare the financial statements of many different entities. For such comparisons to be meaningful the financial statements of these different entities must be reasonably comparable – that is, they must be present similar information in similar format. To achieve this goal, financial

26 A comparative analysis of the public and private sectors financial reporting practices in Nigeria

statements are prepared in conformity with a set of “ground rules” called Generally Accepted Accounting Principles (GAAP). Generally accepted accounting principles (or GAAP) are the “ground rules” for financial reporting. These principles provide the general framework determining what information is to be included in financial statements, and how this information is to be presented. The phrase “generally accepted accounting principles” encompasses the basic objectives of financial reporting, as well as numerous broad concepts and many detailed rules; (Meigs et.al, 2003). The information that results from financial accounting activity is usually prepared by management – the very group whose successes and failures are documented in the financial reports of an accounting entity. This is why outside parties or stakeholders usually want to be assured that the information they receive is objective and is consistently presented. Objective here refers to whether the information fairly depicts what actually happened. Consequently, GAAPs were developed for collecting and reporting financial information to external users. Business and not-for-profit organizations usually engage the services of independent Chartered Accountants to determine and certify that these principles have fairly and consistently applied in reporting the financial activity of the organization (Omorokpe, 2003). In the words of Omorokpe (2003), GAAPs are broad concepts or assumptions or guidelines and detailed practices, including all conventions, rules and procedures that together make up accepted practices at a given time. The International Accounting Standards Committee (IASC), now IASB, recognizes three fundamental accounting assumptions underlying the preparation of financial statements and which are not necessary to disclose although there must be disclosure and an explanation if financial statements are not based on the assumptions (this is skewed towards the private
27 A comparative analysis of the public and private sectors financial reporting practices in Nigeria

sector). These fundamental assumptions according to IAS 1 are the Going concern: which suggests that enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of its operations. Secondly is the accounting assumption of Consistency: which assumes that accounting policies are consistent from one period to another. And lastly, the assumption of Accrual Basis: which states that revenues and cost are accrued, that is, recognized as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they are related. This is also called ‘matching concept’ (Omorokpe, 2006: p.9). 2.4 PUBLIC SECTOR FINANCIAL REPORTING IN NIGERIA The public sector is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal (Wikipedia, 2010). The public sector of a sovereign nation comprises the government and the organizations through which the government undertakes its functions. These are the Civil Service, Statutory corporations and other government-controlled enterprise which provide public utility services (Anyafo, 2000). Government accounting as presently practised in Nigeria is based on cash basis of accounting and fund accounting. Cash basis of accounting recognizes transactions and events when cash is received or paid. It measures the overall financial results for a period as the difference between cash received and cash paid. It provides readers with information about the sources of cash raised during the period, the uses to which those funds were applied and the cash balance at the reporting date. The measurement foci are cash balances and changes therein (Report on Standardization of Federal, State and Local Governments Accounts in Nigeria, 2002).
28 A comparative analysis of the public and private sectors financial reporting practices in Nigeria

no meaningful comparison could be made. A cursory look at the financial statements reveals that the supporting sub-statements. Most of the Accounting concepts are ignored. The sheer volume adds to the delay in production which makes timely presentation of information totally impracticable. the legal requirement is for the Accountant-General to prepare and submit to the Auditor-General the actual and budgeted expenditure as well as the revenue of a given year. both in formats and contents. Understandably. Thus activities are not summarized and adequately analysed to reflect the cost benefit received. There is lack of standards of what should be reflected in respect of certain items like Crown Agents. unrelated and lack summation. Materiality of transactions is not properly evaluated thereby allowing every transaction to have a separate sub-head of revenue/expenditure. have little or no use to many end users. Revenues are not directly matched to their related expenditure. The best approach to meeting this legal requirement had been a matter of choice by the Accountant-General. they are cumbersome and very difficult to understand. They found out that. Reporting requirement are also absent.A close examination of the governments’ financial statements by the Technical SubCommittee of the Federation Account Allocation Committee reveals deficiencies in the existing financial reporting system. Foreign Account etc. The financial statements do not reach a broad range of constituents. both at the State and Federal levels. because they are targeted at a small specialist audience. The statements do not provide the basic information that easily measures the stewardship role of our leaders. Consequently. The end product is varied and numerous approaches by the Accountant-General. governments financial statements are not only too many. Consequently. The matching concept as a test of efficiency is not recognized. Following from the 29 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . the information was stale by the time it was produced (which is some cases ran into two or more years in arrears) and hence cannot be used for meaningful planning and decision making process. The present financial statement is a voluminous document of nearly over 350 pages of printed papers. but also disjointed.

such as some below-the-lines items e. The public sector is made up of several statutory corporations and parastatals functioning within the confines of the government. polytechnics and tertiary-level collegiate institutions are usually spelt-out. 30 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . a report in such a form as the minister may direct on the activities of the parastatal during the immediately preceding financial year and to include in such report a copy of the audited accounts of the Authority for that year end of the auditor’s report thereon (Anyafo. through the minister of water resources. Treasury Clearance Funds. unambiguously. 2002). River basin development authorities are required to prepare and submit to the federal executive council. Agricultural sector. which are ought to have been written off considering their ages and nature in the accounts (Report on the Standardization of Federal. not later than march 31st in each year. The public sector can be said to consists of the Health sector. Annual reporting in the Agro-Sector parastatals. Educational sector. a committee of council referred to as the Finance and General Purposes Committee is created and assigned some clearly spelt-out responsibilities. the enabling statute makes a provision for appointment and duties of auditors (Anyafo. certain items such as capital assets. To ensure probity and accountability.g.above. debtors and creditors are not effectively reflected in the financial statements. in the enabling laws establishing each of them. Furthermore. Each institution is accorded certain financial powers and its governing council is authorized to perform specified financial functions in order to accomplish its prescribed mandate. etc. The current financial statements contain many outstanding balances. State and Local Governments Accounts in Nigeria. 2000). Essentially. this calls for additional disclosure requirements. 2000) The financial reporting requirements of universities. Civil Service.

31 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . 1956. treasury circulars. 1994:79). and the appropriation procedure. and federal financial regulations and states financial instructions are founded.1 Legal Framework of Government Accounting In Nigeria: The public sector accounting in Nigeria is rooted in a number of legal instruments. The financial memoranda regulate the local governments’ accounting. the books of accounts to be maintained and the procedures to be followed in the preparation of accounts and government financial statements (Anyafo. financial regulations and financial instructions provide for the control and management of public finances at the federal level and for the audit of the accounts of individual states. Finance (Control and Management) Act 1958 governs the management and operation of government funds. government accounting and financial reporting. the Finance (Control and Management) Act). which sets the general framework for the total financial management.2. and the Annual Appropriation and Supplementary Appropriation Acts. Anyafo (1994:1) notes that these legal instruments constitute the statutory bed rock upon which the government accounting manuals. the most important aspect of the Act is that it regulates the accounting format and basis of accounting for the preparation of government accounts. However. Perhaps. The legal instruments at the federal level include: The Constitution of the Federal Republic of Nigeria. According to Oshisami (1992). 28. respectively. 1958. In addition the Act regulates the accounting system. 1999. the Constitution covers the following key areas in government accounting: The operation of funds.4. the Audit Ordinance No. the external controls for operating the accounting system in terms of audit and investigations.

1956 as amended by Audit Act 1988 provides for the Audit and accountability for the public funds of government in Nigeria. Section 7 sets out the duties of the Auditor-General for the federation. 1981) of USA. The legal instruments of Government accounting are not without criticisms in respect of certain stipulations. have been criticised variously by Ngwu (1999:200). not only for regulating financial and accounting matters. within a period of seven months after the close of each financial year. They posit that the present general application of cash basis of accounting may not entirely permit the Government financial reports to achieve its objectives. and National Council on Governmental Accounting (NCGA. Oshisami (1992:130). Section 81(2) of the Constitution authorises the President to make withdrawals from the Consolidated Revenue Fund of the sum necessary to meet the expenditure and the appropriation of those sums for the purpose specified therein. Chan (1992:1). to the Auditor-General for the federation the accounts showing the financial position of the federation of Nigeria on the last day of such financial year.The Audit Ordinance. This provision in its present state makes the accrual basis of accounting illegal. The mandatory use of cash basis accounting as specifically mandated by Finance (Control and Management) Act. Section 13 mandates the Accountant-General of the federation to sign and present. but principally to provide for the issue from the Consolidated Revenue Fund such sums of money as demanded justifiable for the recurrent expenditure including contribution to the Development Fund for capital projects for the service of the federation. Appropriation Acts are enacted annually for the purpose. Gary (1992). They contend that Cash basis of accounting is adjudged useful for short term fiscal control whereas Accrual basis of accounting is the superior method for the economic 32 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . The Audited financial statements are thereafter presented to the public accounts committees of the National Assembly (section 85(5) of the Constitution).

Critics further argue that reporting by fund creates a fragmentary and incomprehensible picture of government finances. A question arose as to whether each fund should also constitute a reporting entity.resources of any organisation. 33 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . 1992:41). the report of research conducted by Likireman and Vass (1984) on government expenditure recommended continued adoption of cash basis of accounting by government. it results in accounting measurements based on the substance of transactions and events rather than merely when cash is received and disbursed. NCGA recommends use of the accrual basis to the fullest extent practicable in the Government environment. certainly. assets owned or held. Chan (1992:1) opines that this practice. and thus enhances their relevance. it is not ‘user-friendly’. proprietary. considering the voluminous annual report resulting from this practice. neutrality. timeliness. however justifiable on grounds of stewardship. In essence. all funds of a government must be classified into one of three fund categories: Governmental. and fiduciary. or expendable and non-expendable funds. completeness and comparability. legal and contractual compliance. However. The Finance (Control and Management) Act 1958 also requires the preparation of government accounts on fund basis. The category of a fund determines the type of accounting and financial reporting that is accorded the activities conducted.it produced comprehensive reports that are not comprehensible. and liabilities incurred by that particular fund (Brooks.

the accounts showing fully the financial position as at the last day of each financial year of the Consolidated Revenue Fund and all other Government funds (Section 24). usually generated from general tax levies support current operating activities. the purpose of government accounting is to provide information about the economic and financial affairs of government agencies. It is tailored to emphasize the use of funds provided to accomplish objectives designed in the best interest of 34 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .64) states the objectives of government accounting is to ensure that a full account is made to the legislature on management of public finances and that its financial control as prescribed by the Minister of Finance in accordance with the provisions of the Constitution of the Federal Republic of Nigeria (section 5). and to enable the Accountant-General to present to the Auditor-General for audit purposes. Anyafo (1994: p.4. was collected in amounts that at least equalled the cash paid for those purposes and whether laws restricting the collection and expenditure of public funds were followed by those who administered the programmes. 1994:61). The primary focus of financial accounting and reporting in those early days was determining whether cash. In essence.2 Objectives of Government Accounting: Nigerian system of government accounting has its roots from the British colonialists who were confronted with accounting and reporting problems that required resolution without the assistance of professional accounting standardsetting organisations (Anyafo.2. Holder (1992:41) opines that little thought was originally given to the usefulness of the information content of Government Financial Statements for external accountability. 33 1958. institutions and units. In the light of Financial (Control and Management) Act No. Holder (1992:41) submits that the primary users of such reports were the administrators and legislative representatives of government that were guided by that information in performing their duties.

tax payers. to provide financial information useful for monitoring performance under terms of legal. and to provide information useful for evaluating managerial and organisational performances. 2004: p. Governmental Accounting Standard Board (GASB) of USA (1987) proposed the following objectives: that financial reporting should assist in fulfilling government’s duty to be publicly accountable and should enable users to assess that accountability. which preclude external reporting by the government. lacking in the legal requirement of financial reporting in the Nigerian context is the external reporting by government. 35 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . contractual and judicial requirements.7) reports that in Australia. to provide financial information useful for planning and budgeting and allocation of resources on the achievement of operational objectives.9). Comparatively. Glyn (1987:8) relates these objectives to include: providing information that is useful for determining and predicting the flows. use of funds requires stewardship reporting. to provide information useful for determining and predicting the economic condition of the government unit and changes therein. it should assist users in evaluating the operating results of the government entity for the year. A comparison of Nigerian Governmental Accounting system and the United Nations’ model for Government Accounting further highlights the areas of discrepancies (Ngwu. and should assist users in assessing the level of services that can be provided by the government entity and its ability to meet its obligations as they become due (Aruwa. Similarly. After considering the governmental environment and users needs. Glyn (1987: p. balances and requirements of short-term financial resources of the government unit. the report of the committee on Public Sector Accounting stated the primary objectives of accounting in the public sector organisations as provision of information necessary for management controls and public accountability. However.

Full accrual is considered best accounting practices by international organizations for the public as well as the private sector. which provide considerable support for financial statement consistency and comparability. 2.3 Global Trend in Public Sector Financial Reporting As the whole world is moving towards having a single set of global financial reporting standards for private sector organizations. 2004: p. North Atlantic Treaty Organization (NATO etc have adopted International Public Sector Accounting Standards (IPSAS).10). IPSAS include detailed requirements and guidance. The IPSAS standards for adoption require accounting on a ‘full accruals’ basis.4. These are high quality independently developed standards issued by IPSASB (formerly IFAC Public Sector Committee). programmeplanning and appraisal of performance in physical and financial terms. an integral part of International Federation of Accountants (IFAC). efforts are currently been made for public sector organization in the same direction. 36 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . the organization for Economic Co-operation and Development (OECD).1999:200): Cash accounting seems to constrain the realization of Accounting system being capable of serving the basic financial information needs of development. Various International Development organizations like European Union (EU). planning programming budgeting system (PPBS) and the accrual basis of accounting need to be firmly implemented for the accounts to provide financial data useful for economic analysis and reclassification of government transactions to assist in development of national accounts (Aruwa. They are the only international accounting standards applicable to public sector and other not-for-profit organizations.

It enables shareholders and other parties to be abreast of the activities of the reporting entity. As a results. There are several statutes enacted by the government to govern the conduct of economic activities in the private sector. It guides towards investment decisions. Securities and Exchange Commission (SEC).5 PRIVATE SECTOR FINANCIAL REPORTING IN NIGERIA The importance of financial reporting cannot be over-emphasized by any means. state pensions). In addition there is no universally agreed approach to the valuation of particular sets of assets such as heritage. infrastructural or military assets. how the companies life may be brought to an end. for some public sector activities such as for the treatment of tax revenues and social policy obligations. etc. NAICOM. and lots more. performance evaluation by the managers of the company. individual governments that wish to improve to the accrual basis will have to develop their own standards or.IPSASB has made considerable programs over the last few years in developing a set of International Public Sector Accounting Standards for public sector financial reporting on the accrual basis of accounting (Sutcliffe. how they are to prepare their accounts. as the Standards are not comprehensive. serve as a tool to which creditors rely to make credit decisions. However. either inventing new country standards or acting in a way that effectively ignores the problems that exist. the Nigerian Stock Exchange 37 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . 2. financial institutions – regulatory agencies like the CBN. etc. It has been described by several scholars and researchers as the process of conveying information about the performances of an entity to the stakeholders. these statutes provides the requirements for the registration and/or formation of companies. NDIC. The oversight of financial reporting in Nigeria are the Nigerian Accounting Standard Board (NASB). The main one which is the Companies and Allied Matters Act (CAMA) 1990. there are as yet no agreed standards for significant areas as taxation and social policy obligations (for example. PENCOM. 2003).

5. The purpose of financial reporting is to tell a company’s economic story. the Institute of Chartered Accountants of Nigeria (ICAN) and other recognized similar bodies set ethical standards for their members in Accounting Profession. to provide information useful in making investment and credit decisions. 2006).(NSE). while the Nigeria Accounting Standard Board (NASB).5.1 Objectives of Private Sector Financial Reporting: As mentioned earlier. 2. one of the most fundamental obligations of the public company is the full and fair public disclosure of corporate information. the judiciary (courts. 2004). As a result of the SEC’s and the professional body’s efforts. claims to those resources. The principal regulatory body is the Securities and Exchange Commission (SEC) – especially for limited liability companies. the objectives of financial reporting are that: to exact accountability from the stewards with whom capital resources have been entrusted. financial reporting essentially involves preparing and issuing financial statements. 2. p. including financial results (Dopuch and Sunder. its financial position and the results of its operations. all of an organization’s financial statements must meet minimum 38 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . as completely. the accounting profession (ICAN. 1980.2). In addition. an independent standard-setting body. ANAN). Therefore. tribunals etc) (Nigeria – Accounting and Auditing ROSC. sets procedural standards (Omorokpe.2 The Regulatory Aspect of the Private Sector Financial Reporting in Nigeria: Financial accounting is regulated in an attempt to ensure that the resulting reports are understandable. clearly and faithfully as possible. The NASB pronouncements on accounting matters have come to be recognised as Generally Accepted Accounting Principles (GAAP). reliable and relatively consistent between comparable reporting periods. to enable users of financial report make assessment of the cash flow prospects of the entity. to provide information about an entity’s resources. and changes in resources and claims during the period under review.

Regulation of accounting information is aimed at ensuring that users of financial statements receive a minimum amount of information that will enable them take meaningful decisions regarding their interest in a reporting entity. the information must be summarized in the financial statements – rather than reported in full – because so many transactions occur during the course of a reporting period. ensure that the standards comply with existing regulatory frameworks. Of necessity. issuance and review of accounting standards for preparers and users of financial statements. Securities and Exchange Commission and the Stock Exchange. the standards were treated as just generally accepted accounting principles. The bodies responsible for these regulations are often statutory agencies such as the Accounting Standards Board. The Nigerian Accounting Standards Board is the body responsible for the issuance of Accounting Standards in Nigeria. Until 2003. when the Nigerian Accounting Standards Board Act was enacted. 2010). This mandatory approach arises from the fact that there is the need to ensure uniformity in the preparation and presentation of corporate reports throughout the country. which now makes it mandatory for accountants preparing corporate reports to adhere strictly to the provisions of the Accounting Standards issued by the board. the NASB is now the only body recognized by law for the development. ensure that accountants comply with the Generally Accepted Accounting Principles in the discharge of their functions. and to ensure that the standards comply with the domestic accounting need of our country (Financial Reporting and Ethics.standards of disclosure and show a degree of uniformity in the reporting of transactions that are the same or similar. Other institutions responsible for the regulation of 39 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . With the passing into law of the NASB Act 2003. This Board was initially an advisory body responsible for the production of standards that will serve as a guide to Accountants in the preparation of financial statements. The bulk of this framework is usually contained in Accounting Standards.

BOFIA.3 The Companies and Allied Matters Act (CAMA) 1990: the companies and allied matters act is the principal statute governing the regulation of enterprises in Nigeria. while the Securities and Exchange Commission has the Investment and Securities Act. All these requirements are made to supplement the elaborate provisions of the Nigerian Accounting Standards (Financial Reporting and Ethics. 1999. maintenance of technical reserves and solvency margin required by all insurance businesses in Nigeria. This is the governing body for companies formed in Nigeria. These Acts provide some specific requirements relating to the Accounts of every corporate entity within its fold. With the post-registration requirements as contained in the act is aimed at protecting the public from misleading and fraudulent use of corporate and business names as well as boosting economic activities in the country. the Nigerian Insurance Commission (NAICOM). Each of these regulatory authorities has an enabling law that guides the activities of the various institutions operating in the sector. NAICOM has the Nigerian Insurance Act 2003. the enactment of the companies and allied matters act in 1990 paved the way for effective and streamlined economic and commercial activities in Nigeria. public offer and sale of securities and mergers. for instance provides specific requirements relating to the minimum paid up capital. The Insurance Act also provides for the minimum paid up capital. Amongst other things. lending limit. 2010). statutory deposit. 2010). types and classification of insurance businesses. books and accounting records to be kept. 2. and the Securities and Exchange Commission (Financial Reporting and Ethics. statutory reserves.accounting information in Nigeria include: the Central Bank of Nigeria (CBN). take-over and acquisitions. 40 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . The CBN has the Banks and Other Financial Institutions Act (BOFIA) 1991.5. classification of assets. returns and publication of annual accounts by banks. The Investment and Securities Act on the other hand makes provision for the registration of capital market operators.

5. specifically the balance sheet and profit and loss account.5. and they shall give notice of the date to the Corporate Affairs Commission within 14 days of the determination. 2. the directors shall at a date not later than 18 months after incorporation of the company and subsequently once at least in every year.3.5. 2.5 Other requirements: Section 342 requires directors of a company to include in the financial statements a directors report containing the following: Fair view of the development of business of the company.3. determine to what date each financial statements shall be made up.3 Approval of financial statements: Section 343 (1) requires that a company’s balance sheet and every copy of its financial statements laid before the company in general meeting or delivered to the Commission shall be signed on behalf of the Board by the two directors of the company of the company. 2. lay before the company in general meeting copies of the financial statements of the company made up to date not exceeding nine months previous to the date of the meeting.3. Other requirements of CAMA in relation to financial reporting include the following: 2. 2. Stating the amount (if any) which they recommend should be paid as dividend and the amount which they propose to carry to reserves.Schedule 2 of CAMA prescribes specific formats for financial statements.1 Financial year end: Section 334 (4) requires that the directors of a company shall at their first meeting after the incorporation of the company.3.3.5.5. Names of persons who at any time during the year.4 Payment of dividend: Section 379 (2) requires that the dividends shall be payable to shareholders only of the distributable profits of the company.2 Timeline for the preparation of the financial statements: Section 345 (1) requires that in respect of each year. were directors of the 41 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .

providing guidelines for minimum content requirements. guidelines for their structure and minimum requirements for their content. An entity shall prepare financial statements on a going 42 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . with additional disclosure when necessary. and the policy and performance of the company (CAMA. It sets out overall requirements for the presentation of financial statements. setting out the framework and responsibilities for the presentation of financial statements. measuring and disclosing specific transactions (NASB.5 International Financial Reporting Standards: the International Financial Reporting Standards prescribe the basis for the preparation of general purpose financial statements to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities.4 Statement of Accounting Standards: these are statements issued by the Nigerian Accounting Standard Board on specific area or topic in financial accounting. 2. management shall make an assessment of an entity’s ability to continue as a going concern. 1990). When preparing financial statements.company. is presumed to result in financial statements that achieve a fair presentation. 2010). An entity shall not describe financial statements as complying with IFRSs unless they comply with all the requirements of IFRSs. Basically. defining the components of financial statements. The application of IFRSs. there are 30 standards which have been issued by the Board. and dealing with the basis for recognising. the provisions are that an entity whose financial statements comply with IFRSs shall make an explicit and unreserved statement of such compliance in the notes. To date. the acceptance/applicability of which is mandatory by users and preparers of financial statements.5.5. Director’s obligation to notify his interest in the company and companies in the same group. the principal activities of the company in the course of the year and any significant change in those activities during the year. 2.

IAS 1 requires an entity to present. When management is aware. An entity shall recognise all items of income and expense in a period in profit or loss unless an IFRS requires or permits otherwise. An entity shall include comparative information for narrative and descriptive information when it is relevant to an understanding of the current period’s financial statements. Except when IFRSs permit or require otherwise.concern basis unless management either intends to liquidate the entity or to cease trading. the entity shall reclassify comparative amounts unless reclassification is impracticable. an entity shall disclose comparative information in respect of the previous period for all amounts reported in the current period’s financial statements. An entity shall present a complete set of financial statements (including comparative information) at least annually.e. comprehensive income) are required to be presented in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). All non-owner changes in equity (i. unless required or permitted by an IFRS. disclose the information required by IFRSs that is not 43 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . An entity shall not offset assets and liabilities or income and expenses. Components of comprehensive income are not permitted to be presented in the statement of changes in equity. in making its assessment. or has no realistic alternative but to do so. the entity shall disclose those uncertainties. An entity shall present separately each material class of similar items. An entity shall present separately items of a dissimilar nature or function unless they are immaterial. When the entity changes the presentation or classification of items in its financial statements. An entity shall clearly identify the financial statements and distinguish them from other information in the same published document. of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern. The notes shall present information about the basis of preparation of the financial statements and the specific accounting policies used in accordance with paragraphs 117–124. in a statement of changes in equity. all owner changes in equity.

that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.presented elsewhere in the financial statements. An entity shall disclose information about the assumptions it makes about the future. An entity shall also provide additional disclosures on puttable financial instruments classified as equity instruments (IASB. and to provide information that is not presented elsewhere in the financial statements. An entity shall disclose. 2010). and other major sources of estimation uncertainty at the end of the reporting period. apart from those involving estimations (see paragraph 125). but is relevant to an understanding of any of them. An entity shall disclose information that enables users of its financial statements to evaluate the entity’s objectives. that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. the judgements. 44 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . in the summary of significant accounting policies or other notes. policies and processes for managing capital.

and government institutions in Nigeria. It went further to explain the sources and method of data collection. Ten (10) organizations will be selected each from the private sector and public sector to assist come up with a credible comparative analysis of financial reporting practices in both sectors in Nigeria. 3. the researcher intends to get smattering idea about the problem under study.3 SAMPLE SIZE AND SAMPLING TECHNIQUES A total number of twenty (20) organizations will be selected for the purpose of this study. 3. because the researcher considers some subjects of the population as typical cases which are most likely to provide the requisite information. The population. covers offices of the Auditor-General for the Federation and the States. as well as the justification of the method used.2 POPULTION OF THE STUDY The population of this study consists of all companies listed on the Nigerian Stock Exchange as at 31st December. as well. These organizations will be selected using the judgemental sampling techniques. The judgemental sampling method is used. It defines the population of the study. the sample size and the sampling techniques that are adopted in the research work. Judgmental sampling is a sampling technique that is based on the selection of a sample of appropriate size on the basis of the researcher’s judgement of what is desired. 2009. On the other hand.CHAPTER THREE RESEARCH METHODOLOGY 3. Most 45 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .1 INTRODUCTION This part of the study will consider the research methodology the present study employs.

First Bank Plc. selected companies and government parastatals included the sample size. Aric Airlines Dangote Group Plc Ashaka Cement Plc Total Nigeria Plc Oando Plc Corner Stone Insurance Plc African Alliance Insurance Plc Government Institutions Federal Mortgage Bank Nigerian Agricultural and Co-operative Bank Ltd. Source: Researcher’s compilation. articles and 46 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . the need for the judgmental sampling technique is necessary. The listed companies and government institutions to be included in the sample are as follows: Table 1: S/N 1 2 3 4 5 6 7 8 9 10 Listed Companies Guarantee Trust Bank Plc. The primary sources will involve developing questionnaires to be sent to the selected organizations for completion. 2011. and any attempts to cover substantial part of the population may not be feasible. The secondary data shall involve using annual reports of the government. the researcher is operating with a little budget. journals.of all. The judgemental sampling technique will be employed because the population of the study is to an extent enormous. Questionnaires will also be designed and addressed to the Auditor-General for the Federation and for the States. financial statements of selected companies and government parastatals. Nigerian Aviation Handling Company Plc. Nigeria Export and Import Bank Nigerian National Petroleum Corporations Nigerian Deposit insurance Corporation Nigerian Postal Services Federal Inland Revenue Service Power Holding Company (PHCN) Nigerian Social Insurance Trust Fund National Agricultural Insurance Co. 3.4 SOURCES AND METHOD OF DATA COLLECTION This study will use both primary and secondary sources of data. Hence.

5 MATHOD OF DATA PRESENTATION AND ANALYSIS This study shall in the course of presenting the data collected. employ the tabulation method of data presentation. organisation. The descriptive analysis deals with the study of the distribution of the variables of the study in relation to subjects such as the profiles of the respondents. 47 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . And for the analysis. the descriptive analysis will be used to come up with a detail analysis of financial reporting practices in the private and public sectors organizations in the Nigerian economy. groups or any other subject. 3. Descriptive analysis is used to summarize the information generated in the research usually by the use of percentages and tables.publications most of which could be obtainable from the Nigerian Stock Exchange secretariat and the offices of the Auditor-General either for the Federation or for the State.

a total number of twenty three (23) questionnaires were administered.CHAPTER FOUR DATA PRESENTATION. and out of these questionnaires. out of which only fourteen (14) of them were completed and returned. while the remaining two (2) questionnaires bounced back. Ten questionnaires were administered to selected public sector entities. but it never received the attention that it deserved. while four (4) were not returned. The table above shows that.2 Respondents Private Sector Org. Org Office of the AGF Accountancy Firms Total Source: Researchers compilation. 2011. One (1) questionnaire was sent to the Auditor-General’s office. only eight (8) were turned over.1 ANALYSIS OF ADIMINISTERED QUESTIONNAIRE Questionnaires Administered and Response Rate Questionnaire Administered 10 10 1 2 23 Questionnaire Returned 8 6 0 0 14 Response Rate 80% 60% 0% 0% Table 4. 48 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . since they are the persons (recognized by law) to audits the financial statements of these companies and corporations. and only six (6) questionnaires were returned. These questionnaires were administered via email (internet) and via post (postal services) to their head offices at the Federal Capital Territory (Abuja) and Lagos state. Public Sec. ANALYSIS AND INTERPRETATION 4. Ten questionnaires were also administered to the sampled private sector organizations. Two (2) more questionnaires were designed and sent to two (2) different accountancy firms with a view to finding out the position of financial reporting of firms and other public sector enterprises.

The table above shows a breakdown of the responses received from the public sector entities in respect of the questions raised by the researcher. while the other four (4) (constituting another 50%) use the accrual base accounting system to prepare their financial reports. four (4) corporations representing 50% of the total response received. 2011. However. The study shows that. are using the cash system of accounting in preparing financial information. 49 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .3: Analysis of Public Sector Entities’ Questionnaires Accrual Base IFRSs SASs IPSASs Agree 4 8 6 2 8 7 7 6 8 8 0 1 1 2 0 0 Disagree 0 Cash Particulars Base Accounting system in use 4 Compliance with Standards Type and Standard complied with Criticism against the cash base system of accounting Adoption of IPSASs Possibility of Convergence with IPSASs Weakness of the current practice in the presentation of government information The need to switch from Cash Base to Accrual Base Establishment of Regulatory Body in the public sector. out of the eight (8) corporations that responded to the questionnaire. evidences from this study give the following details: Table 4. Source: Field survey.2 ALIGNING PUBLIC SECTOR FINANCIAL REPORTING PRACTICES IN NIGERIA WITH GLOBAL PRACTICES: This study has sought to find out whether or not financial reporting in the public sector could be aligned with international public sector financial reporting practices.4. The table also shows that all the public sector entities are complying with accounting standards in the preparation and presentation of accounting information for the organizations.

Whereas. while the remaining two (2) constituting 25% comply with International Public Sector Accounting Standards (IPSASs) in presenting their financial information. these views was also shared by some of the corporations surveyed.Six (6) corporations representing 75% of the sampled size use the Statement of Accounting Standards (SASs) in preparing reports. the reasons put forward are that. In the same vein. out of which one of the directorates will be for the regulation of public sector financial reporting in Nigeria. the study shows that seven (7) of the corporations suggested that there is a need for Nigeria to adopt the International Public Sector Accounting Standards (IPSASs) in order to accelerate the pace of financial reporting in the public sector in Nigeria. However. seven (7) of the organizations share that. one (1) public sector entity disagreed with the idea that Nigeria should adopt the IPSASs. It shows that the arguments filed against the use of cash basis accounting system. perhaps the fear is that. it is possible for Nigeria to adopt and converge to the International Public Sector Accounting Standards. when Nigeria adopts the IPSASs this could result in the country relinquishing its authoritative powers of reporting to the west – this is another form of colonialism as they said. fraud perpetration and corrupt practices. 50 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . As a matter of fact. by local and international critics was also supported by these corporations. the Nigerian Accounting Standard Board is currently making efforts to ensure that Nigeria fully adopts the International Financial Reporting Standards (IFRSs) and in doing so. all the eight (8) public sector organizations surveyed for the study representing 100% of the sample agree with the view that the cash base accounting system is fundamentally flawed and are often used as a tool for carrying out sharp practices. the Board will be divided into seven directorates. It has been observed that the cash base system is major factor of money laundering financing.

Value for Money Audit). and incomes earned may not necessarily relate to the period under review. they claimed. Attempt to make these statements timelier than what they are presently. and in most cases. they claim that the procedures followed in preparing and presenting the statements are quite necessary – this statements are thoroughly scrutinized and audited. may breed sharp practices in the public sector and intense fraud perpetration. Evidences in the past shows that. carrying out operation in global financial markets. thereby transferring the inefficiency of other periods into the current reporting period. international creditors and so on. they are too voluminous thereby making it difficult for users and other stakeholders to make informed judgment and decision.Consequently. They argue that expenses incurred. government financial information are mostly untimely. with an increasing desire to ensure that there has been the economy. efficiency and effectiveness in the use of public money (i. and that this will create international opportunities for Nigeria. two (2) organizations suggest a divergent opinion with the others. and that government information is mostly bulky in nature. Whilst. Six (6) corporations in the survey confirm that government information is found to be wanting in the area of timeliness. all the surveyed public sector entities consented to the notion that Nigeria needs to adopt the IPSASs. given the Nigerian situation. This study also holds the same position with the previous researches. In response to the question raised by the researcher on whether Nigeria need adopt the IPSASs. They also posit that financial information do not present the true position of government operations at any particular point in time. lacks correlation.e. as the use of the cash base accounting system has undermined the ‘matching’ concept. a corporation in the survey suggests a different opinion on the possibility that Nigeria’s adoption and convergence with the IPSASs is likely not feasible. international investors. 51 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .

All the corporations consented to the idea that there are needs to establish a regulatory body in the public sector that will be responsible for the regulation and imposition of sanctions on non-compliance with financial reporting rules and regulations. debates for the usage of the accrual base accounting system in the public sector in Nigeria has lingered for quite a time now. Incomes earned for a period and the expenses incurred in the course of earning that income are matched for that same period.3 ASSESSMENT OF THE FINANCIAL REPORTING PRACTICES IN NIGERIA. Table 4. it is quite pertinent to note at this point that. This is in recognition of the ‘matching concept’. Finance (Control and Management Act). 52 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . Financial Memorandum. It is however interesting to know that. This is said to be adequate for financial reporting because it reflects the true position of a business at any particular point in time. the predominantly used accounting system in the Nigerian public sector is the cash base system.4 Analysis of Private Sector Entities Questionnaires: Cash Base 0 Accrual Base 6 5 1 6 6 0 0 SASs IFRSs Agree Disagree Particulars Accounting System in use Compliance with Standards The Need to adopt IFRSs Actions against noncompliance Source: Field Survey. and Audit Ordinance. circulars issued by the Central Bank of Nigeria (CBN) and so on. However. other laws and subordinating standards regulating financial reporting practices in the public sector are the Constitution of the Federal Republic of Nigeria. The table above shows that the entire private sector entities surveyed used the accrual base accounting system. speaking of the last ten years. 4. In times past. 2011. Although.

the public sector in Nigeria is making the transition from the cash base to accrual base accounting system. Other than these standards.4 shows that the need to adopt the International Financial Reporting Standards (IFRSs) in Nigeria is necessary.e. the companies’ strongly recommends the full adoption of the standard. i. while one (1) company adopts the International Financial Reporting Standards (IFRSs) and complement the standard with the Statement of Accounting Standards (SASs) – in a bid to further strengthen the corporate governance standards and enhance transparency and disclosure in financial reports. but this seems not to be working. the rate of usage of the cash base and accrual base systems is to a 1:1 bases. Five (5) companies comply with the Statement of Accounting Standards (SASs). In recent times. with additional disclosure when necessary. Nigeria has been using the IFRS on the basis of adaptation. The table also shows that all the surveyed private sector companies comply with an accounting standard in preparing and presenting reports about the performance of the companies. for every one public sector entity using the cash base system. the Companies and Allied Matters Act (CAMA) 1990 is the main legal framework for corporate accounting practices in Nigeria. because IFRSs states that an entity whose financial statements comply with IFRSs shall make an explicit and unreserved statement of such compliance in the notes. is presumed to result in financial statements that achieve a fair presentation. Table 4. there is one public sector entity that uses accrual base system. and that an entity shall not describe financial statements as complying with IFRSs unless they comply with all the requirements of IFRSs. as all the surveyed companies are in agreement with the adoption. This study finds out 53 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . In view of this statement. The application of IFRSs. This study shows that.

This would also increase the level of foreign direct investment (FDI) in countries like Nigeria. For the surveyed banks. are not capable of revealing the precise financial health of organizations because issues like inflation and risks. all the surveyed companies prepare their reports and accounts on the principles of the CAMA – this is perhaps a law. 4. The National Insurance Commission Act (NAICOM) is not left out in the regulation of insurance companies’ financial reporting practices. Foreign Investors need a reporting mechanism that allows them to compare and contrast the performance of two firms. at some specific years (particularly in 2009) some of the banks are in violation of the provisions of the BOFIA. Current standards for reporting financial statements in Nigeria. one would expect a reduction in arbitrage opportunities caused by information rationing. the Central Bank of Nigeria (CBN) also issue CBN circulars for the banks to comply with. IFRS will allow investor firms to capture material deficiencies in management practices and provide a reasonably impartial basis for making informed decisions. Look at it this way. is described as fictional. Specifically. Similarly. financial statements reported in Nigeria currently. not a standard. The basic principle behind the move towards IFRS by many Nations is the need by the global marketplace to translate and determine the actual value of a firm. the study shows that banks do comply with the provisions of the Banks and Other Financial Institutions Act (BOFIA) in making reports. if all companies utilize the same set of rules from an accounting and reporting perspective. 54 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . It reveals that.that. Moving towards IFRS conveys a level of trust for the information being reported in the financial statements of many companies.4 THE NEED TO ADOPT THE INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs).

there is yet to be a provision for reporting “inflation". Other activities are education and training. However. This task is really a big one for NASB to cope with. The NASB has consequently been mandated by the Federal Executive Council (FEC) to immediately create a centre of excellence to cater for regulators. attributing this backwardness to low influx of foreign investments in Nigeria. however. advocates of IFRS have suggested that the adoption of International Financial Reporting Standards (IFRSs) is pertinent. given its inadequacies. because presently. NASB has been directed to ensure that the action plan and framework of targeted activities that will enable a smooth transition to IFRS by all stakeholders are effectively coordinated and communicated. calls to mind the need for the National Assembly (NA) to urgently pass the Bill for the Financial Reporting Council (FRC). Senator Jubril Martins Kuye. are not reported. And it. The adoption will. According to Nigeria's Minister of Commerce and Industry. public sector financial reporting and applicable financial reporting standards as well as the future role of the NASB after the adoption of IFRS. the standard of reporting financial statements in Nigeria allows external auditors to post a clean bill of health on a company's financial statement while in reality. This is meant to comprehensively regulate financial matters in the country. stimulate Direct Foreign Investment (FDI). These include creating awareness on the potential impact of the conversion identifying regulatory synergies to be derived and communicating the temporary impact of the transition on business performance. Other countries like Brazil and Netherlands have a way of reporting effect of inflation in their financial statements but in Nigeria. auditors and other professional accountants in the understanding of the IFRS.which matter a lot to business operations. and will not only help Nigeria’s industry but also enable Accountants to practice their profession anywhere in the world. therefore. The Bill was prompted by the drive towards common global 55 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . calamity and failure are knocking.

the world becomes really a global village where cross-border deals could easily be sealed. The study also finds out that the NASB currently sets accounting standards and enforce compliance. and equally attract Foreign Direct Investments (FDIs). The public sector is on its own. arose due to differences in accounting standards and creative accounting or fraudulent accounting practices. This is the time for such investor-friendly bills as the Financial Reporting Council (FRC). local entrepreneurs as well as the SMEs. Most importantly. with five distinct directorates to be charged 56 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . It had informed the need to observe and enforce a standard code of best practices in financial reporting for all countries of the world. for only the private sector. No doubt. the adoption of the IFRSs is a welcome initiative which has inherent merits for the economic growth and development of the country. the economy stands to immensely benefit. It is when this is done that economically. amongst others. thereby enhancing the businesses of multinational foreign direct investors. the new dispensation would prevent a repeat of the “Cadbury scandal” which. it will bring about “International Language” understood and trusted by both local and foreign investors.public sector accounting standards of which the International Federation of Accountants (IFAC) and such international agencies like the World Bank are on the forefront. Business Hallmark (2008) is of the candid opinion that once the reporting entities in the country adopt globally accepted. Essentially. this would enthrone transparency in the conduct of business in the public and private sectors of the economy. At least. the Leasing Bill and the likes to be quickly passed for our national good. the action would engender great confidence in foreign investors. The global experience of the financial crisis of the 1990s had opened the eyes of the International Community. high-quality accounting standards by converging Nigeria's national accounting standards. But the FRC Act is expected to be robust and comprehensive.

except a few instances where the anti-graft agencies such as the Economic and Financial Crimes Commission (EFCC) and Independent and Corrupt Practices Commission (ICPC) wade into alleged financial misconduct to unearth what happened and how it happened once in a while. 57 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . public sector. the Actuarial Standard Board.with setting of specific standards for both public and private sectors. The scenario captures even those at the helm of affairs in the three-tiers of government who are not held accountable by the NASB. Inspection as well as corporate governance. Even the political parties and countless donor agencies that raise money for various projects would be captured such that those who use them as conduit pipes to line their pockets with public resources could be easily checked. Nobody seems to care to find out. it would be easier for the public to know how the public sector institutions are run. But the FRC Act would inevitably evolve an appropriate system which will ensure responsive and accountable stewardship even in government. horrendous. Those directorates are for private sector. Business Hallmark believes that with the Financial Reporting Council (FRC). The level of fraudulent practices being perpetrated at the three-tiers of government is to say the least.

Matters in chapter two consist of the conceptual framework of financial reporting. It also talks about private sector financial reporting in Nigeria. This chapter is however a recap of the entire research project. scope and limitations of the study were all discussed. Chapter 3 begins by identifying the population of the study. Chapter two (2) constitute the review of related literature which are relevant to the area of the present study. and other issues therein like the global trend of financial reporting. users and stresses the importance of financial reporting.CHAPTER FIVE SUMMARY. the sources and methods of 58 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . research questions. The concept refers to the process of revealing the financial position and the result of operations of businesses. It highlights and discussed public sector financial reporting in Nigeria. it proceeds further to define the sample size and sampling techniques that was used. definitions and views of scholars and past researchers on the subject matter. The third phase of this study dwelt on the methodology on which the research was conducted. the laws and standards regulating financial reporting in the corporate sector. objectives of financial statements. objectives. concepts. problem statement. The study begins with chapter one (1) where issues like the background to the study. Through this means. CONCLUSIONS AND RECOMMENDATIONS 5.1 SUMMARY The importance of financial reporting cannot be over-emphasized by any means. shareholders and other stakeholders are informed on the performances and activities of the firm. significance of the study.

Basically. At the conclusion of chapter 3. the chapter also discussed the method of data analysis used by the study as well as their justification. Consequently. chapter 4 deals with the presentation. interpreted and analysed. Companies comply mostly with the Statement of Accounting Standards in the preparation and presentation of financial statements. this study has finally come up with the conclusion that the cash base system of accounting is still used by public sector entities in Nigeria. interpretation and analysis of the data collected from the field and those generated online as well as other authoritative documents and news reports. the cash base system is no longer ideal for reporting in the public sector. even though some entities were found to be using the accrual base system. and has also made exerts to ensure that the data were analysed objectively – all forms of subjectiveness were reduced to the barest minimum. 5.data were also identified in this phase. the study proceeds to chapter 4 where all data generated were presented. reason being that it undermines the ‘matching’ concept. and do not present a true picture of financial position. In this phase.2 CONCLUSION / FINDINGS After doing all the researches and analysing all data. while few prepare their statements in line with International Financial Reporting Standards (IFRSs). used to perpetrate fraud and sharp practice. The Companies and Allied 59 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . Statements of Accounting Standards (SASs) are in wide usage by public sector entities as when compared to those using the International Public Sector Accounting Standards (IPSASs). the researcher made relentless effort to gather the required data within the shortest possible time. This study also concludes that all companies incorporated under the Companies and Allied Matters Act by the Corporate Affairs Commission (CAC) in Nigeria use the accrual base system.

both in the public and private sector. This could however be achieved through compliance with the International Public Sector Accounting Standards (IPSASs).Matters Act (CAMA) is the main law/statute governing the conduct of economic activities and also specifying the way companies prepare their annual and interim accounts. There should be established an independent body set up by the Nigerian government that will be responsible for ensuring strict compliance with the standards so adopted. 5.3 RECOMMENDATIONS On the basis of the conclusions drawn. The Central Bank of Nigeria (CBN) Act also plays a role in regulating the reporting of banks. the Banks and Other Financial Institutions Act (BOFIA) and the National Insurance Commission (NAICOM). Nigeria should transit from cash accounting to the accrual base accounting in the public sector in Nigeria. strong capital markets and easy direct investments (FDI). Nigeria should adopt the International Financial Reporting Standards (IFRSs) if she must enjoy the benefits of complete global business – the benefits of having global investors. 60 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . 3. 2. the following recommendations were made: 1.

Nigerian Accounting Standard Board (NASB).E. O. George Banta Company Inc. Anyafo.BIBLIOGRAPHY Adams. vol. P.. ELBS/Pitman publishing London. (1986): Accounting Theory and Practice. Companies and Allied Matters Act (CAMA) 1990: Dopuch. M.A. N.I (2009): the Adaptability of Accrual Accounting in the Public Sector. Glautier. Lagos: Federal Government Press. S. Iyika. Federal Republic of Nigeria (1958): the Constitution of the Federal Republic of Nigeria 1999. (2010): Historical Background. and Sunder. 1 p. Menasha. (1980): FASB’s Statements on Objectives and Elements of Financial Accounting: the Accounting Review. GOPRO Foundation press. Enugu. Federal Republic of Nigeria (1999): Finance (Control and Management Act 1958. N. Wisconsin. Due Process in Standard Setting and Future Outlook. R. M. (2000): Nigerian Public Accounting and Budgeting. and Underdown. B. Corporate Publishers Ventures. M. Government and Public Sector Accounting. 61 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . Lagos: Federal Government Press.2 American accounting association. Anumaka. (2006): Public Sector Accounting and Finance. Nigerian Accounting Standard Board (NASB). A. Maryland Lagos.W.

Plc. Omorokpe. Journal of Social and Management Studies. New York. T. K. and Weygandt J. Regulatory Framework of Financial Reporting (2010) 62 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . States and Local Government Accounts in Nigeria (2002): Main Report. Oshisami. Financial Reporting and Ethics. Nigeria. Meigs. (2006): Financial Accounting Practice in business and not-for profit organization. Vol.). Accounting and Auditing. 155 – 167. Bayero University Kano. the basis for business decisions. States and Local Government Accounts in Nigeria (2002): Executive Summary and Financial Reporting Model. A. Intermediate Accounting.E. (2007): Role of SAS 10 in Reducing Creative Financial Reporting Practices by Banks in Nigeria. (1992): Government Accounting and Financial Control. Bettner M.A. Kieso D. Report on the Standardization of Federal. and Atabs. pg.1. R. R.A. Lagos-Nigeria: Megavons (W. and Meigs. Report on the Observance of Standards and Codes (ROSC) 2004. 12. Lagos. I. Mareh Publisher.Kantudu. R. S.O. (1996): Accounting.2 Report on the Standardization of Federal. Washington. Vol. John Wiley and Sons Inc. Vol. M. Mc-Graw Hill Book Company.J (1980).

I am conducting a research on the topic. Whatever the case. Dear Respondent. Bayero University Kano. Nigeria. Faculty of Soc.INTRODUCTORY PAGE Department of Accounting. Financial reporting is a means whereby owners and outsiders get to be abreast of the activities of an entity. with a view to adding new ideas to the existing body of knowledge.sc Degree in Accounting. P. accounting should contain facts that are comprehensible to those who have a reasonable understanding of business economic activities and willing to study the information with reasonable diligence.B 3011. both within a country and among countries. Kano state. it is customary for students to carry out research on an area of accounting. I am a 400 level student of Bayero University Kano studying Accounting.. In partial fulfilment of the requirement of a B. My name is Olusegun Olowu Amos. 17th January. They are based on accounting policies which vary from enterprise to enterprise. Sci. Financial reports must be clear and understandable. It is an undisputable fact that the major aim of financial reporting is the conveyance of relevant information useful to the various categories of users of such information. “a comparative analysis of the public and private sectors financial reporting practices in Nigeria”. & Mgt.M. The importance of financial reporting cannot be overemphasized by any means. For this purpose. 63 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . 2011. which is of interest to the students.

The confidentiality of the information is as well assured. I assure you that the information supplied by you will strictly be used for the purpose of this research and for no any other purpose. 64 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .I’m counting on your maximum cooperation as you respond to the questions that follow. Thanks.

Yes b. 5. Are internal control systems in place in the organisation? a. No 3. When transactions take place in the organisation. How can you rate the effectiveness of the controls in place? a. Do you have an accounting unit in the organisation? a. 1. No 2. What system of accounting does the organisation use? a. Does the organisation comply with any standard when recording transactions carried out in the organization? a. Yes b. how are they recorded? a. On a double entry system b.APPENDIX 1 QUESTIONNAIRE Please tick as appropriate. Unsatisfactory. No 4. On a single entry system 6. Yes b. Yes b. Cash Based accounting system b. Do you have internal audit unit in the organization? a. No 65 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . Satisfactory b. Accrual Based accounting system 7.

and these critics have suggested that the accrual basis of accounting be adopted by public institutions. Disagree 11. Yes b.8. Could public sector financial reporting practices in Nigeria be aligned with global public sector financial reporting? a. The International Public Sector Accounting Standard Board (IPSASB) has been making efforts to develop accounting standards that are applicable by public sector entities around the world. Agree b. Statement of Accounting Standards (SASs) c. If your answer above is Yes. No 66 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . then what standard is been complied with? a. Should Nigeria also adopt these standards? a. some countries of the world have now adopted these standards. Agree b. The cash basis of accounting has been criticized to have many problems. Others specify 9. International Public Sector Financial Accounting Standards (IPSASs) d. International Financial Reporting Standards (IFRSs) b. Disagree 10. What is opinion on this statement? a.

Agree b. Disagree 13. Yes b. Disagree 16. suggest some steps that need to be taken to remedy the problems of financial reporting in the public sector? 67 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . No 15. there is a need to set up a body (like the NASB) that will be responsible for issuing standards for the regulation of financial reporting practices in the public sector in Nigeria. and in most cases. when Nigeria adopts the International Public Sector Accounting Standards (IPSASs). From your own point of view. government financial statements are mostly untimely. Yes b. Do you agree that. lacks correlation.12. and to also ensure that public sector entities will comply with such standards? a. Is this true? a. Agree b. Do you agree with the view that. It is argued that. comparison between private and public sector entities will be made a lot easier? a. when public sector entities switch from the cash basis of accounting to the accrual basis. accounting information could be harmonized with those of other countries? a. they are too voluminous making it difficult for its users to analyse and make meaningful decision. No 14. Do you think in your opinion.

.. ..................................... ...................................................................................... ........................................................................................................... .................................................................................................................................................................................................................................................................................. 68 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .........NB: use extra sheets where necessary..................................... ..................

How can you rate the effectiveness of the controls in place? a. Unsatisfactory. Are internal control systems in place in your organization? a. Yes b. No 4. Do you have internal audit unit in the organization? a.APPENDIX 2 QUESTIONNAIRE It is my assumption that the person(s) completing this questionnaire accounting have the required and background of standards other regulatory pronouncements governing financial reporting in Nigeria and abroad. No 2. Please tick as appropriate 1. No 3. Do you have an accounting unit in your organization? a. What accounting system is used by the organization? 69 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . Yes b. Yes b. 5. And that he/she (or the group of persons completing Standards the questionnaire) and the is familiar with the provisions of the Nigerian Statements of Accounting (SASs) International Financial Reporting Standards (IFRSs). Satisfactory b.

do you think. Disagree 9. Accrual based accounting system 6. this will be bring about international opportunities (such as international investors. Which accounting standards does the organisation use in preparing its annual and interim financial statements? a. and so on) for Nigerian local companies? a.a. Partial compliance c. Statement of Accounting Standards (SASs) b. Others specify 7. comparison of performance among companies around the world will be made a lot easier? a. Disagree 10. Agree b. international creditors. Full compliance b. If you agree to the above assertion. Agree b. To what extent does the organization comply with such standards? a. International Financial Reporting Standards (IFRSs) c. Are there actions taking against the company for non- compliance with laid down standards and other pronouncements by the relevant standard setting bodies? 70 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . Do you think in your opinion. international capital markets. when Nigeria fully adopts the IFRSs. Cash Based accounting system b. Others specify 8.

a. No 71 A comparative analysis of the public and private sectors financial reporting practices in Nigeria . Yes b.

... this is done with a view to ensuring uniform financial reporting by firms all around the countries of the world.................. over the years...................... made effort............................ and is still making efforts to develop acceptable and applicable standards (i............... You can use extra sheets where necessary............................................................ The International Accounting Standard Board (IASB) has............................................. .................................................... ..................... If your answer above is yes.................................................. You can use extra sheets where necessary........... ................................................11....................... what are they? ............................................. 72 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .............................................. ............................................... IFRSs) for users and preparers of financial statements around the world........................e............................................ 12.................................. ........................ Kindly suggest other reasons why Nigeria should be a part of this development? ....................... ........................................

Thank you for your raft attention. 73 A comparative analysis of the public and private sectors financial reporting practices in Nigeria .

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