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Background of The Study As the complexities of society and government increased, another type of enterprise unit emerged that was not profit motivated. The communal Christian church of Late Antiquity and the state supported university at Alexandria are early examples of such private and public enterprises and the instances and variety of such organisations, proliferate as we approach modern times. (Emerson O. Henke 1988). The reasons for the development of not-for-profit organizations are many and complex. In the united states of America (USA), they have come into existence primarily to provide services that society or some segment thereof feel are needed but cannot be effectively provided by profit entities. Such services, for instance, as the maintenance of order within the community and military protection against exploitation by external groups can be best be provide by some sort of community supported entity. Democratically controlled governmental entities are today among the most important not for profit organizations, and the services supplied by them fat exceed the maintenance of public order and protection against the threats of external entities. As people improved their productivity and their standard of living, they were able to give more attention to the reasons for their existence and to the Improvement of the society in which they lived. The expansion of governmental activities has been accompanied by the development of private, voluntarily supported not-for-profit enterprises. These governmental and other not-for-profit organizations are similar to business enterprise in that they convert resources into goods or services. However, the members, contributor and other resource providers do not, in such capacity, receive any financial return directly from their resource conversion activities. Not-for-profit organizations are entities normally without transferable ownership interests, organized and operated exchisevely for social, educational, professional, religious, health, charitable or any other not-for-profit purpose. We have the government not-for-profit organizations which are created by formal community action for the purpose of providing
2005). there is the need for standardization of not-for-profit organization’s accounting and reporting practice. However. the legislative bodies and boards controlling not-for-profit enterprises is typically in the direction of . bodies responsible for accounting regulation in the USA have issued standards that guide financial reporting in America in the same vein. charged with the responsibility of issuing standards. state and local government units. whereby companies reaped off the dispersed investors. contributions and the resource providers no longer control them instead. such as education or health care. The Accounting standards prescribe rules and principles that are supposed to enhance business practices. the financial records should disclose the extent to which the service objectives of the enterprise have been achieved. which they increasily did (Drutman. taxation. internal managers run the organization at their whims and accountable to no one (Drutman. They have the sanction of law allowing them to levy taxes as a source of support and they include such entities as federal. investment. Between 1938 and now. This implies that managers could easily use the organizations to enrich themselves. Since 1982 when Nigeria Accounting standard Board was established. They are generally chartered by a government unit but have no power to levy taxes as a source of support. 2005). it has issued various standards covering issues like disclosure of accounting policies. They depend on voluntary contribution of some or all of their resource. provided on a not-forprofit basis within the community. information to be disclosed in financial statements. a conglomerate of accounting professional also formed the Accounting standard committee. As these not-for-profit organizations grows in size. The standardization in these two countries influenced other countries of the world including Nigeria. In order to make the internal manger financially accountable. On the other hand. coupled with devastating insider related manipulations could be said to be the foundation of Accounting standardizations. accounting for depreciation etc. we have private not-for-profit organizations which are created by group of people who are interested in seeing particular services. Statement of Problem The depression experiences in the United States of America’s (USA) economy around 1929. Also for not-for-profit organization. leasing. in England.community services.
Accountants bring knowledge and skills to bear in carrying out these acts. In this study. Also. CONCEPTUAL FRAMEWORK Accounting Standardization Concept Accountants are responsible for preparation of accounts and financial statements. In addition. which shall facilitate the procedures for standard setting and provide bases for the nature of standards that shall be issued in Nigeria and other countries where. The procedures were not standardized and the major consequence was that given the same company. Although there may not be anything ordinarily wrong with this. As a contribution. we investigated the perception of stakeholder of accounting standard on not-forprofit organization in Nigeria. There is also a natural inclination for internal mangers to enlarge the operation of the enterprise to justify greater salary benefits. therefore. but with different managements and different accounting ideologies. Purpose of the Study - To examine the role of acting standards in not-for-profit organization. financial reporting is standardized. .enlargement and expansion of organizational activities without appropriate regards for the affordability programmes proposed. it is expected that the result of the study shall provide information on the impact of standardization. therefore. expected to allow an informed conclusion on whether Nigerian Accounting Standards are in the interest of the shareholders in business. motive a study into the impact that standardization of financial reporting procedures have on not-for-profit organizations in Nigeria. not-for-profit organization have no externally imposed “self – cleansing” force similar to the need for earning a profit in the profit area. The results of the investigation is therefore. it meant that accountants used and applied varying accounting principles in treatment of accounting transactions. as long as such principles were not contravening the Generally Accepted Principles in Accounting (Oghuma and Iyoha. some accounting issues require judgment. The situation. two different set of accounts may be generated and both giving a true and fair view. 2005). at the same point in time. experience and the knowledge of the person that is passing the judgment. The judgment can be based on individual skill.
with global head office in New York. can produce different balance sheets for identical companies with similar characters and in the same industry (Oghuma and Iyoha. the enabling law for the operations of the agency was only enacted in 2003. or producing different domestic standards. in financial reporting.These variables involve individual differences and may affect the judgment. 2005). with or without modification. 2005) and (Oghuma and Iyoha. which are . These fundamentally. which defines how companies should display transactions and events in their financial statements. though. the body issued standards with statutory backing since establishment. The Board evolved from the then Association of Accountants of Nigeria. Countries choose between adopting the International Standard directly. This is to ensure the needed uniformity of practice. Although. Whatever the individual country is adopting. which was formed in 1960 (Kantudu. Nigeria Accounting Standard Board (NASB) was established as a private sector initiative in 1982. The Nigerian Accounting Standard Board has domesticated standards issued by the International Standard setting body. the accounting profession needed more in terms of proper record keeping. The International Accounting Standard Board (formerly Committee) is the arm of IFAC that is charged with the responsibility of developing the standards and the Board has been responsible for the issuance of about seventy Standards as International Accounting Standards (IASs) or International Financial Reporting Standards (IFRSs). The board became an agency of government ten years later. 2005). presentation and interpretation of financial statements (Kantudu. 2005). also. standards weredeveloped as a guiding tool. should be in the best interest of the owners. Some International standards have been dropped. enlightenment of users of financial reports. serves as the measure for the regulation of their accounting and reporting. Nigeria-ROSC (2004) reported significant gap between Nigeria Accounting Standards and the International Accounting Standards. Different accountant. have no International equivalent. Accounting Standardization in Nigeria The responsibility for the development and production of Accounting Standards in Nigeria lies in the Nigeria Accounting Standard Board. Arising from the above. about 4 SASs. developing their own standard to reflect what the international standards have provided. therefore. transparency. compatibility and enhanced public confidence. and provision of a framework for preparation. In the report of Nigeria-ROSC 2004 twenty IASs are said to have no equivalent SASs. The global body for the issuance of accounting standards is the International Federation of Accountants (IFAC). In addition to this.
and there are variations in the depth of disclosure by the studied companies. The study was on the extent of compliance and the impact that compliance have on financial reporting. ownership structure. less than the international benchmark of 91%. The two studied examined disclosure practice by Nigerian companies. the study found ‘that there is a significant positive impact of the extent of equity participation of multinational companies on the extent of compliance with accounting standard’ and that ‘there is no significant relationship between audit firms’ size and compliance with accounting standards in Nigeria’. In addition to the fact that the work of Adeyemi (2005) on the impact of compliance on financial reporting. The study by Adeyemi (2005) is similar to that of Wallace (1988). (2005) assessed the level of compliance with the requirement of ‘SAS No 2’ ‘information to be disclosed in financial statement’ by Nigerian Quoted Companies. Updates and revisions to IASs are not implemented in relevant SASs.ROSC.still in use in Nigeria. 2004). while IAS/IFRS issued are close to 50 (now 69) (Nigeria. Based on a study of 25 sample firms’ data for 5 years. number of employees. the study showed that Nigerian companies comply with accounting standards reasonably well. These demonstrate and evidently confirm the gap said to be existing as reported. From a study of 96 companies. The study found that company size. The study. His study showed 74% compliance by Nigerian companies. Kantudu. showed that there is less variability on the application of the accounting standard on employee retirement benefit between quoted firms in Nigeria. Overall about 29 (now 30) SASs have been issued so far. company age. which is below the international benchmark of 91%. auditor’s size. The level of compliance is. The work of Kantadu (2006) was to investigate the impact of enforcement power given to Nigerian Accounting Standard Board on compliance. multinational affiliation. between 1998 and 2003. however. His investigation was based on 10 years study of 30 companies and his result was that the Act has significantly influenced the application index. with the standard on employees’ retirement benefits. . On the impact of compliance on financial reporting. the study found that gap exists between requirement of the standard and disclosure practice of listed firms. stock exchange listing and profitability are associated with disclosure level. however. Adeyemi (2005) also studied the impact of accounting standards on financial reporting. the study also measured the degree of compliance by Nigerian businesses. specifically. in compliance with Nigerian accounting standards.
not free from biases and errors. however. is to maximize shareholders’ wealth (Anderson. It. because to pay penalty is cheaper than compliance. drawn from best practices to all aspects of business organizations and concluded that standardization is good for business and can be applied to all areas of business. and Friedman cited by Danielson. The powers of the directors are to be employed for that end. NigeriaROSC (2004)’s evaluation based on a review of 45 sets of financial statement of listed companies observed some compliance gaps between IAS and the National Standards. with the requirements of the standards. Izedomin (2001) investigated the level of compliance to accounting standards in the banking industry concludes that banks could be said to be complying. Shareholders’ wealth is usually reflected in the value of business. Bainbridge (1993) cited Dodge Vs Ford case as stating: “A business corporation is organized and carried out primarily for the profit of the stockholders. Kasum (2009). significantly but not totally. The discretion of the directors is to be exercised in the choice of means to attain that end. contrary to the findings of financial statement review. or to non-distribution of profits among stockholders in order to devote them to other purposes”. however. 2008). The result of interviews as stated. in few situations where they did not comply. It involved a review of the institutional framework for regulation and an empirical investigation of the regulated institutions. to the reduction of profit. 2007). and Ramsay. however. despite their contravention of Bank and other Financial Institutions Act. Nigeria-ROSC (2004) was about observance of standard and codes of accounting and auditing by Nigerian companies. According to the study. Marshall. and does not extend to a change in the end itself. The overriding goal of the corporation. They evaluated 15 out of the 25 listed insurance companies based on their compliance with 11 relevant standards. examined the applicability of standardization. Issue of business value . In the same manner. The document reported that most of the entities reviewed complied with limited number of national disclosure requirements and that disclosures by companies are summarily inadequate. thus. put presentation and disclosure in financial statement as good with confirmation that the statements are.Oghuma and Iyoha (2006) investigated the level of compliance of listed insurance companies to accounting standards. Shareholders’ theory defines the primary duty of a firm’s manager as the maximization of shareholders’ wealth (Berle and Means. Their result was that quoted insurance companies generally comply with disclosure requirement of statement of accounting standards. All of these studies are interested in compliance alone and not the impact of compliance on owners. Jones. stated that banks generally comply with national accounting standards. the concerned company preferred to pay penalty. Heck and Shaffer. Mitchell.
2002). an unbiased assessment will not be complete without consideration for other stakeholders in business value. Darvas.is of a fundamental duality. According to Anderson. 2002). in connection with some of the recent theoretical representations of the firm (Charreaux. quality. To create value. They have to recognize their interdependence. capturing value is inherently competitive. according to which the firm is a nexus of contracts between the different stakeholders or the one according to which. As much as it is important to stress shareholders’ value maximization. The objectives of performance measurement and management are to increase the shareholders’ value. however. The shareholder value theory states that a company creates this value when it meets or exceeds a cost of capital that suitably reflects its investment risk (Lambert and Burduroglu. directed towards only the shareholders is incomplete. In particular. Brandenburger and Nalebuff (2002) summarized that “creating value that can be captured is the essence of business”. 2003). For value capturing. In addition. to take the whole stakeholders into account (Milgrom and Roberts. exists in sharing of captured values of the business (Brandenburger and Nalebuff. a business needs to align itself with customers. profitability. employees and many others”. The concept of created value must be adapted. it seems incompatible with the contractual representation. according to the efficiency principle. customers and suppliers are also looking out for their slice of the pie with the shareholders (Brandenburger and Nalebuff. The first contractual representation is referred to as the economic theory of corporation. customer satisfaction and any other goal of an organization resulting in improved performance (Moncla and Arents-Gregory. employees. growth. suppliers. “Whereas creating value is an inherently cooperative process. The view of Aoki (1984) above. focusing on only the shareholders and the methods they use to control managers does not enable a proper identification of the mechanisms of value creation. Representation of value. which is also . people cannot act in isolation. therefore. 2004). creating value and capturing value. just as businesses compete with one another for market share. Forsyth. competitiveness. Conflict. Gumley and Welsh (2006). To create value. and customers of outputs” while the second is more like their ‘team production theory’ that “is based on the notion that two or more individuals must combine their valuable resources to produce a single output”. the firm constitutes a cooperative game between the different stakeholders (Aoki 1984). it is a contract “with suppliers of inputs. since the firm’s decisions involve consequences for all stakeholders. 2000: 10). 1990).
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