IFRS Adoption and Its Impact on Market Risk Reporting in Nigeria

IFRS Adoption and Its Impact on Market Risk Reporting in Nigeria

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Background of the Study
Market risk, the risk of losses in financial markets due to changes in market variables such as interest rates, exchange rates, and stock prices, is an essential aspect of financial reporting for companies in Nigeria. With the adoption of International Financial Reporting Standards (IFRS) in Nigeria, market risk reporting has become more transparent and standardized. IFRS provides guidelines for recognizing, measuring, and disclosing market risk exposures, allowing stakeholders to assess the impact of these risks on a company's financial position.
The transition to IFRS in Nigeria has brought significant changes to market risk reporting practices, aligning them with global standards. However, the effectiveness of these changes in improving market risk reporting in Nigeria remains unclear. This study aims to examine the impact of IFRS adoption on market risk reporting practices in Nigerian firms, with a particular focus on how these practices have evolved since IFRS implementation.

Statement of the Problem
While IFRS adoption in Nigeria has led to significant improvements in financial reporting, there is limited research on how it has affected market risk reporting. Understanding this relationship is essential for ensuring that Nigerian companies can accurately report and manage market risk, which is vital for investor decision-making and financial market stability. This study seeks to assess the impact of IFRS adoption on market risk reporting in Nigeria.

Aim and Objectives of the Study
The aim of this study is to examine the impact of IFRS adoption on market risk reporting in Nigeria. The specific objectives are:

1. To evaluate the changes in market risk reporting practices in Nigerian firms following IFRS adoption.

2. To assess the quality and transparency of market risk disclosures under IFRS in Nigerian firms.

3. To analyze the impact of IFRS compliance on stakeholders' understanding of market risk in Nigerian firms.

Research Questions

1. How has IFRS adoption changed market risk reporting practices in Nigerian firms?

2. What is the quality and transparency of market risk disclosures under IFRS in Nigerian firms?

3. How has IFRS compliance influenced stakeholders' understanding of market risk in Nigerian firms?

Research Hypotheses

1. IFRS adoption has significantly changed market risk reporting practices in Nigerian firms.

2. IFRS compliance has improved the quality and transparency of market risk disclosures in Nigerian firms.

3. There is a positive relationship between IFRS compliance and stakeholders’ understanding of market risk in Nigerian firms.

Significance of the Study
This study will provide insights into the impact of IFRS adoption on market risk reporting in Nigerian firms. The findings will be useful for regulators, policymakers, and financial market participants in improving the transparency and quality of market risk reporting.

Scope and Limitation of the Study
The study focuses on Nigerian firms that have adopted IFRS and their market risk reporting practices from 2012 to 2025. Limitations include access to detailed market risk data from firms and potential variations in the implementation of IFRS across different sectors.

Definition of Terms

• Market Risk: The risk of losses in financial markets due to changes in market variables such as interest rates, exchange rates, and stock prices.

• IFRS Compliance: The adherence to International Financial Reporting Standards in the preparation of financial statements.

• Risk Reporting: The process of disclosing a company’s risk exposures and management strategies in financial reports.

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