EFFECT OF THE ADOPTION OF INTERNTIONAL FINANCIAL REPORTING STANDARD (IFRS) ON THE INFORMATION RELEVANCE OF ACCOUNTING PROFIT IN NIGERIA. (PRO AND POST ADOPTION ANALYSIS.

Nuhu Otaru Isah

ABSTRACT

The study examines the “Effects of the Adoption of IFRS on Information relevant of Accounting Profit in Nigeria. (Pre and post analysis of Listed Oil and Gas in Nigeria”. The study uses 9 listed oil and gas firms in the NSE. The study uses Eight (8) firms over a 18 years period, nine years pre IFRS adoption (2003 to 2011) and 9 years post IFRS adoption (2012 to 2019), making a total of 142 firm years observation. To measure value relevance of firms’ post IFRS adoption, the study modifies the Ohlson (1995) model to determine whether the adoption of IFRS has increased the value relevance of accounting information in the sampled firms. The results show that the adjusted R-Square in the post IFRS adoption is higher than the pre-IFRS adoption indicating a more value relevance of published financial information after IFRS adoption. On whether there is incremental value relevance, the results show all the explanatory variables were significant in the post adoption of IFRS but only one independent variable was significant during the pre IFRS period. To measure earnings per share, the modified Ohlson (1995) model is used and the results revealed a significant increase in all explanatory variables except profit margin that was negatively inclined but statistically significant, indicating a decrease profit margin in post IFRS adoption in Nigeria. Conclusively, the different tests carried out provide compelling evidence that the adoption of IFRS in Nigeria has positively and significantly impacted on the quality of published financial information by significantly increasing the value relevance of financial information and as well as significantly increasing earnings (accounting profit) in Nigeria. The study recommends that; Management of listed oil and gas firms must pay attention to the magnitude of earnings reported in their financial statements. Moreover, since earnings have demonstrated to be more associated with share price, firms should undertake innovation and investments that generate more earnings. Therefore, companies must pay attention to business expenses and find innovative ways of cutting down expenses in order to generate superior earnings.

Keywords: IFRS Adoption, Value Relevance and Financial Performance.