Complete Project – IMPACT OF FINANCIAL REPORTING TOOLS ON BUSINESS IN NIGERIA

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CHAPTER ONE

INTRODUCTION

Financial reporting on the efficiency of businesses has grown in recent years as people’s wants and needs have expanded. The state of the economy right now is a major contributor to this rise, since it discourages individuals from starting up businesses on a grand scale.

Specifically, financial reporting is the branch of accounting that deals with the recording, interpreting, and reporting of a company’s financial transactions and related data. Creating audited financial accounts for general consumption is a part of this. All parties involved in a company’s operations would benefit from having access to this kind of data, including investors, customers, vendors, lenders, workers, regulators, and business owners.

An organization’s financial health is documented by compiling a set of financial statements. Due to the wide variety of customers for accounting data (including governments, banks, auditors, other businesses, stockholders, and individuals), financial statements that can be understood by people who are not trained in accounting are in high demand. A wide variety of investors and other parties analyze financial statements to choose whether or not to purchase a company’s stock. When such financial documents are decoded, the following may serve as a helpful guide for understanding the data and making sound decisions.

Both national and international norms for bookkeeping and reporting financial transactions apply. Across all jurisdictions, GAAP serves as the universally accepted set of rules for how financial transactions should be recorded and reported. These are the norms, practices, and guidelines that accountants must adhere to while putting up financial reports for their clients. The International Financial Reporting Rules (IFRS) are a different set of accounting standards that are widely used internationally. specifying the format in which certain sorts of financial and other events must be reported. The International Accounting Standards Board (IASB) publishes the International Financial Reporting Standards (IFRS) for use in financial reporting (IASB). More and more countries are adopting IFRS, which has led to more financial reporting uniformity across multinational corporations.

Managerial accounting is used to offer accounting information to managers to assist them operate the business, whereas financial reporting is used to generate accounting information for persons outside the organization or not engaged in the day-to-day operation of the firm.

1.1 BACKGROUND TO THE STUDY

The importance of financial reporting to a company’s bottom line is increasingly recognized by those who use financial statements. Reporting errors owing to subjective or arbitrary judgements exist in both accounting and business operations. Internal financial records are a subset of financial reporting that focuses on a company’s finances inside the company. The purpose of financial statements (such as an income statement or balance sheet) is to record, summarize, and report on company activities in line with prescribed norms and standards.

Remember that financial reporting’s primary purpose is not to report a company’s value. Financial reporting information instead has the following characteristics: it is relevant, clear, dependable, comprehensive, and objective, with the purpose of enabling individuals to determine the value of a corporation for themselves.

The transactions of the period must be recorded promptly and accurately, and interpreted in accordance with GAAP, the National Accounting Standard Board, the International Accounting Standard Committee, and the Companies and Allied Matters Act, in order for a company’s financial reporting information to contain the information required to prepare a financial report which shall have the above characteristics (CAMA).

Accounting for the prudent use of capital provided by investors is a primary driver of the development of the financial reporting profession.

1.2 STATEMENT OF THE PROBLEM

The purpose of this research, titled “impact of financial reporting tools on business in Nigeria,” is to examine the financial reporting data of a sample firm in Oyo State in order to draw the following conclusions.

Measure of how much financial reporting helps a company succeed or expand. The degree to which a company’s books are in order according to the law is called statutory compliance. Given the plethora of regulators, there is both consistency and disagreement in financial reporting regulation.

1.3 OBJECTIVES OF THE STUDY

The objectives of this study are to critically examine the financial reporting information of the selected company and to probe into the fundamental for their preparation as well as its presentation with a view to determining the following;The adequacy of the basis and the fundamental that guides its preparation

The influence that financial reporting has impact on business performances
The degree to which financial reporting (information) meets the needs of its various users
The extent to which the financial reporting conform to the established standard

1.4 RESEARCH QUESTIONS

In order to determine impact of financial reporting tools on business in Nigeria, it is pertinent to ask or test the following questions:

Do companies comply strictly with the statutory regulation of accounting profession?
Does the financial reporting information has impact on business profession?
Does the information disclosed in the financial statements adequate to support good financial decision making?

1.5 STATEMENT OF THE HYPOTHESIS

The following null and alternating hypothesis shall be tested in the course of this research work.

H0: The information provided in financial statements is not adequate to support good financial decision making.

H0: Business organizations do not comply with the statutory regulations of accounting profession

H0: Financial reporting has no impact on business organization performances

1.6 SIGNIFICANCE OF THE STUDY

This study is very important and most significant at this period when companies with impressive income statement and statement of financial position are still faced with continuity threat. Financial account is “Prima Facie” evidence on the state of affairs of companies as well as its performance and could be relied upon as a certificate because it has the auditors’ certification.

This study offers solutions to the above raised questions, it is my believe that the result of these finding will go a long way to help other researcher in this area of study. It will also enhance the understanding of the structure of published financial reporting information and accounts by the users.

The various users groups of published financial statements will benefit from this study as follows:

The potential investors: These are groups who are interested in committing their financial resources to the purchase of the company’s share. The set of people will benefit from this study as the result of this study will arm them with the necessary tools with which to evaluate the financial reporting of a business organization as it affects them.
The general public: This group shall benefit from this report by knowledge that the business organization exists for them not against them and such has to live up to its full responsibilities
The regulators of financial reporting Report: This group includes the Nigerian Accounting Standard Board (NASB), the companies and Allied Matters Act (CAMA), the Banking and other financial institutions act of 1991 (BOFIA), prudential guidelines for licensed banks, the insurance act 2003. The study will help them to standardize and harmonize their operations.

1.7 JUSTIFICATION OF THE STUDY

The redirection of the economy towards self-sufficiency and make it to rank among the twenty largest economies in the world by AD2020 calls for industrialization and growing the economy to meet expectations. This involves grooming the small and medium scale businesses to take the center stage in driving the economy. This effort cannot produce expected result if the targeted businesses lack accountability and thus sustain perpetual losses. Studies have shown that the strength of great nations derives from the small and medium scale enterprises who work tirelessly as backbones to the industrial giants (Arowomole and Oyedokun, 2006; Olatunji, 2000; Iopev and Kwanum, 2012). How prepared are Nigeria entrepreneurs to run organizations with valid and credible financials that could encourage or stimulate investments.

1.8 SCOPE OF THE STUDY

This study could have covered the impact of financial reporting tools on business in Nigeria of all sectors of the Nigeria Economy but due to the challenges of such a task especially the financial resources with which to execute it, this is now limited to brewery industry. The study of Nigeria Breweries Plc Ibadan Oyo State.

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Complete Project – IMPACT OF FINANCIAL REPORTING TOOLS ON BUSINESS IN NIGERIA

Complete Project – IMPACT OF FINANCIAL REPORTING TOOLS ON BUSINESS IN NIGERIA

Complete Project – IMPACT OF FINANCIAL REPORTING TOOLS ON BUSINESS IN NIGERIA

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