The Role of IFRS in Enhancing Financial Ratios for Nigerian Companies
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Background of the Study
Financial ratios are critical tools used by investors, managers, and stakeholders to assess the financial health of companies. The adoption of International Financial Reporting Standards (IFRS) has introduced uniformity and comparability in financial reporting, potentially enhancing the reliability of these ratios. This study examines how IFRS adoption has influenced the calculation, interpretation, and credibility of financial ratios in Nigerian companies.
Statement of the Problem
Prior to IFRS adoption, variations in accounting standards and practices often led to inconsistencies in financial ratio calculations, complicating decision-making for stakeholders. Despite the advantages of IFRS, the extent to which it has enhanced the quality and comparability of financial ratios in Nigerian companies remains underexplored.
Aim and Objectives of the Study
The aim of this study is to evaluate the role of IFRS in enhancing financial ratios for Nigerian companies.
Specific objectives include:
- To analyze the impact of IFRS on the accuracy and reliability of profitability, liquidity, and solvency ratios.
- To assess whether IFRS adoption has improved the comparability of financial ratios among Nigerian companies.
- To evaluate the challenges faced by Nigerian companies in recalibrating financial ratios under IFRS.
- To explore the perception of investors and analysts regarding the credibility of financial ratios post-IFRS adoption.
Research Questions
- How has IFRS adoption impacted the accuracy and reliability of financial ratios?
- Has IFRS enhanced the comparability of financial ratios among Nigerian companies?
- What challenges do Nigerian companies face in recalibrating financial ratios under IFRS?
- What is the perception of stakeholders on the credibility of financial ratios post-IFRS adoption?
Research Hypotheses
- IFRS adoption has significantly improved the accuracy of financial ratios in Nigerian companies.
- IFRS adoption enhances the comparability of financial ratios across Nigerian firms.
Significance of the Study
This study provides insights into the role of IFRS in improving financial ratio analysis, aiding stakeholders in making informed decisions. It also offers recommendations for companies transitioning to IFRS-compliant reporting.
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