Determinants of Accounting Choice of Noncurrent Assets at IFRS First Adoption Among Nigerian Firms

Abstract

This study examines the determinants of accounting choices for noncurrent assets by Nigerian firms at IFRS first adoption within the framework of positive accounting theory. Data were randomly collected from the annual reports of thirty firms that met the adoption target of 2012 and regression technique was used for the analysis. Firms' size and ownership concentration are found as predictors of accounting choice for non-current assets. In addition, the firms mainly choose income increasing strategy by the predominant use of cost model and firms with higher ownership concentration tend to use more of fair value model than income increasing strategy.

The Effects of Independent Audit Committee on the Accounting Policy Decisions of Nigerian Firms

“…Accounting Policy Decisions Accounting policy decisions would have income-increasing or income-decreasing effects on the firm's reported income permissive within the prescribed methods that lead to inefficient contracting (Bowen DuCharme and Shores, 1995;Watts and Zimmerman, 1978;Fields, Lys and Vincent, 2001;Francis, 2001). According to Isa (2014), Nigerian firms used accounting policies that increase their reported income.…”

“…These include labour intensity in organizations and continuous patronage of short-term creditors and the suppliers of inputs. The concentration of ownership and owner-control boards also predicts the decisions on which accounting policy to adopt by firms (Dhaliwal, Salamon and Smith, 1982;Dhaliwal and Schepanski, 1984;Astami and Tower, 2006;Isa, 2014). Whichever incentives derive management decisions on accounting policies in Nigeria, company law requires audit committees to scrutinize their appropriateness before the financial statements are finalized and the oversight could only be effective with the independence of the committee.…”

“…To make the committee more independent and effective in monitoring, the drafted Nigeria Code of Corporate Governance (NCCG), which becomes effective by January 2020, proposed that the committee composed of only independent directors. Prior studies such asBowen DuCharme and Shores(1995), Astami and Tower (2006), Dey, Grinyer and Sinclair (2008), Jackson, Xiaotao and Cecchini (2009), Waweru, Ntui and Mangena(2011), Isa (2014) and Acaranupong (2017) in the literature of accounting choice did not examine the independence of the audit committee as a predictor of the accounting policy decisions of firms. This study tests the significance of audit committee independence on accounting policy decisions within this context to validate the proposition of the agency theory.…”

“…However, the independence of the audit committee in Nigeria does not support effective monitoring on firms' accounting process (Moses,2016;Oliver and Grace, 2017) and the management of the firms could use their discretion against the interest of the shareholders. Fields, Lysand Vincent (2001) noted that studies (such as Dhaliwal, Salamon and Smith, 1982;Bowen DuCharme and Shores, 1995;Astami and Tower, 2006;Dey, Grinyerand Sinclair, 2008;Waweru, Ntui and Mangena, 2011;Isa, 2014) did not include the influence of the auditing process on accounting policy decisions.This has left out an important variable in the literature of accounting choice. According to Parker (1997) and Abbott and Parker (2000), there is growing evidence that the independence of an audit committee is vital to mitigating the adverse consequences of managers' discretions and the manipulations of the accounting process.…”

A RELAÇÃO DOS GASTOS COM P&D COM A QUALIDADE DA INFORMAÇÃO CONTÁBIL

“…Essa flexibilidade pode interferir na qualidade da informação ao usuário, especificamente quando se considera recursos aplicados em pesquisa e desenvolvimento. Os motivos subjacentes às escolhas dos gestores poderiam ser o fornecimento de informações relevantes e confiáveis aos usuários para aumentar sua capacidade de utilizar os números contábeis para prever lucros futuros, para sinalizar informações ou para suavizar ganhos (ISA, 2014). Enquanto a atividade de P&D pode ser vista como um investimento de tempo e dinheiro que cria verdadeiros benefícios econômicos futuros, ela também pode representar estratégias de negócios de alto risco, com incertos benefícios futuros (ABRAHAMS; SIDHU, 1998).…”