International financial reporting standards (IFRS) and firm profitability
Ezelibe Chizoba Paulinus, Anaege Arinze Ethelbert, Aniefor Sunday Jones
The growing need for accounting information across borders and the globalization of business activities as well as the observed diversity in national accounting practices accentuated the need for globally accepted financial reporting standards. This study is on the effect of international financial reporting standard on firm profitability in Nigeria. In order to achieve the objective of the study, the annual report of one hundred and four companies (104) which disclosed a comparative statement of both IFRS and NGAAP for the period under study were selected and analysed. Comparative data for the study were extracted from corporate annual reports and accounts of selected firms for the period 2012-2017. Firm profitability proxy by earnings per share (EPS) and return on asset (ROA) were extracted and analysed. In testing the research hypothesis, the relationship between IFRS and NGAAP is analysed using the ordinary least square (OLS) regression analysis. Gray’s comparability index was also used for measuring the relative impact of IFRS adoption on profitability of Nigerian listed firms. The findings revealed that EPS and ROA are higher under the NGAAP than IFRS. Also, EPS and ROA have a positive relationship during IFRS and NGAAP regimes. Consequent upon this study, it was recommended that Users of financial statements need to distinguish accounting number changes caused by the transition to IFRS from those caused by changes in the business for proper understanding of what causes a particular change.