1.1Background to the Study
Section 33 5(1) of the companies and allied matters act CAMA 1990 as amended stipulates that the preparation of financial statement, shall comply with the accounting standards’ issued from time to time by the Nigeria Accounting Standard Board.
Financial statements are described as the end product of accounting transactions or economic events aimed at providing qualitative and quantitative financial information to evaluate and predict the performance of an organization to permit informed judgment and decision making, (Illaboya,2005, p.167).
In Nigeria, the; standard setting body was the Nigeria Accounting Standard Board (NASB) which is presently referred to as the Financial Reporting Council of Nigeria (FRCN) which was passed into law On 18 May 2011 and was signed into law on 20 July 2011. The financial reporting council of Nigeria like all standard setting bodies in the world is independent of the profession of accounting. The council identifies areas where a measure of uniformity is required so as to bridge the variation in reporting practices and ensure a high level of uniformity which is panacea to corporate compatibility, (Illaboya,2005, p.169).
The need for an accounting standard setting body in Nigeria became urgent when the Nigeria enterprise promotion decree was promulgated to transfer ownership of companies to Nigerians. Foreigners exploited the lack of uniform accounting procedures in valuing their equities in companies affected by the decree. Those companies, whose parents were resident outside Nigeria, followed the dictate of their parents. At the end of it all, there were as many accounting practices reflected in the account as there were companies in Nigeria, (Nnadi, 2007, p.32).