Effects of implementation of International Public Sector Accounting Standards on Nigeria’s financial reporting quality

• Published date: 20 January 2020
• DOI: https://doi.org/10.1108/IJPSM-12-2018-0277
• Pages: 323-338
• Date: 20 January 2020
• Author: Saheed Adekunle Muraina,Kabiru Isa Dandago
• Subject Matter: Public policy & environmental management,Politics,Public adminstration & management

Effects of implementation of

International Public Sector

Accounting Standards on Nigeria’s

financial reporting quality

Saheed Adekunle Muraina

Department of Accounting, Faculty of Administration,

Ahmadu Bello University, Zaria, Nigeria, and

Kabiru Isa Dandago

Department of Accounting, Faculty of Management Sciences,

Bayero University, Kano Nigeria, Kano, Nigeria

Abstract

Purpose –The purpose of this paper is to examine the effects of the implementation of the International

Public Sector Accounting Standards (IPSAS) on Nigeria’s financial reporting quality.

Design/methodology/approach –The study employed a survey research design to determine the effects

of the implementation of the IPSAS on Nigeria’s financial reporting quality. Partial Least Square 3(SmartPLS

3) technique of analysis was applied to achieve the research objective.

Findings –The study found that accountability positively and significantly affects the quality of financial

reporting in Nigeria. Specifically, IPSAS has improved the level of accountability, which in turn improved

Nigeria’s financial reporting quality.

Research limitations –The study only explored two explanatory variables whereas other variables such

as transparency, corruption minimization, comparability and faithful representation were not considered in

this study. It is, therefore, recommended that further studies could expand the scope to cover some other

variables not included in this paper.

Practical implications –IPSAS-Accrual has engendered the Nigerian Government to launch the Asset

Tracking and Management Project (ATMProject) in order to easily track its assets for the purpose of

accountability. Thus, accountability was discovered in this study to be the most essential factor to enhance

the quality of financial reporting using accrual-based IPSAS in Nigeria.

Social implications –Accountability will impact positively on the lives of Nigerians in relation to the

application of public funds to impact on the lives of the masses.

Originality/value –The statistical significance of accountability found in this study, using partial least

square technique of data analysis, will further enhance financial integrity in the country.

Keywords OAGF, IPSAS, Financial reporting quality, Implementation

Paper type Research paper

Introduction

Several governments across the Globe have taken vital decisions to enhance the

management of their public finances in response to the global financial crisis that erupted in

the last decade. Various financial management reforms are therefore being implemented in

public sector entities globally with a view to improving accountability, transparency and

minimization of financial waste through the adoption of accrual-based International Public

Sector Accounting Standards (IPSAS) as recommended by the International Federation of

Accountants (IFAC). Organizations such as the United Nations, European Commission,

Organizations of Economic Cooperation and Development and Northern Alliance Treaty

Organizations have contentiously taken a lead in the implementation of IPSAS.

Numerous government entities have also launched IPSAS implementation projects while

many other public sector organizations have increasingly declared their intention to

implement IPSAS as their accounting framework (Rouvet et al., 2012). IPSAS has numerous

Received 30 December 2018

Revised 13 July 2019

Accepted 5 October 2019

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Effects of

implementation

of IPSAS

InternationalJournalof Public

SectorManagement

Vol.33 No. 2/3,2020

pp.323-338

©EmeraldPublishingLimited

0951-3558

DOI10.1108/IJPSM-12-2018-0277

323

advantages to its adopters. It is also a veritable mechanism for high-quality financial

reporting as well as operational performance due to the fact that items such as non-current

assets, current assets, employee benefits and payroll are taken into account when preparing

and presenting IPSAS-based financial information. With accrual-based IPSAS, the public

resources are better utilized and managed especially in terms of improved financial

reporting, greater accountability and transparency as well as corruption minimization.

In Nigeria, cash-based IPSAS commenced effectively in 2014 while accrual-based IPSAS

began in 2016. The phased approach was used in the implementation of accrual-based

IPSAS because Nigeria had been preparing and presenting its financial statements using

cash basis for over 40 years ( James, 2014). Accrual accounting based on international best

practice is highly essential for a greater degree of accountability and key decision making,

thereby giving rise to good governance and economic development. Under accrual-based

IPSAS, general purpose financial statements (GPFS) are prepared and presented based on

proper recognition, measurement and adequate disclosure of all material items, transactions

and events. So, the implementation of IPSAS in Nigeria has the potential to influence

financial reporting quality in terms of accountability and enhanced decision making.

First, in order to ensure and maintain people’s trust in government, public funds are

expected to be managed in an accountable and transparent manner. Also, there is an

established proof that accrual-based IPSAS promotes a clearer financial position among the

public sector organizations globally (ACCA, 2017). Through accountability, fraud and

corruption could be reduced to the barest minimum. This is due to the fact that IPSAS

adoption has been able to contentiously assist governments to gain greater control of their

revenues, expenditure, payables and receivables.

Second, through IPSAS, the decision making is improved (Huang, 2013), particularly in

areas of CAPEX (capital expenditure) such as purchase/construction of Property, Plant and

Equipment, purchase/construction of investment property purchase of intangible assets as

well as acquisition of investments. The government decision on the CAPEX is highly

essential for economic prosperity.

Research question

In 2010, the Nigerian Federal Executive Council approved the adoption of IPSAS and

International Financial Reporting Standards for the public sector and private sector

entities, respectively, so as to strengthen the country’s preparation and presentation of its

accounting and financial reporting system in accordance with the international best

practices (Peter, 2012). The adoption of the global standards is due to a necessity for better

recognition, measurement, presentation and disclosure requirements of items, transactions

and events in government’s financial reports (Ijeoma and Oghoghomeh, 2014).

Besides, the preparation and presentation of financial statements of public sector entities

in Nigeria have been hitherto rooted in the traditional cash basis of accounting,

characterized by low level of accountability, transparency as well as high exposure to fraud

and corruption in the accounting reporting system. However, the need to go from the

traditional cash accounting system to the accrual-based system of accounting in the public

sector entities has brought about an innovation in the areas of recognition of economic

events, recording of all stocks of assets and liabilities in the statement of financial position,

improved monitoring of current, long-term and contingent liabilities as well as consolidation

of all entities under government control ( Joe et al., 2016).

Moreover, the rationale behind this research stems from the need to assess government

financial management reforms through the adoption of accrual-based IPSAS on qualitative

perceptions of accounting professionals in Nigeria. First, accrual-based IPSAS commenced

in 2016 as another veritable measure to reduce corruption, enhance transparency and

accountability in the Nigerian Public Sector entities. Nigeria still ranked as the second worst

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