The Effect of International Financial Reporting Standards (IFRS) Adoption

on the Performance of Firms in Nigeria

Muhammad Tanko
muhdtanko@kasu.edu.ng
+0234-8029151213
Department of Accounting
Kaduna state university

A paper presented at the International Financial Reporting Standards (IFRS) Conference -

Challenges & Opportunities
International Refereed Conference
1st – 2nd May, 2012

Organized by College of Business & Economics, Qassim University - Saudi Arabia

Electronic copy available at: http://ssrn.com/abstract=2695573

 Abstract
This paper assesses the effect of compliance with the regulation and provisions of the
international financial reporting standards on the performance of some selected Nigerian banks
that are quoted on the Nigerian stock market. The paper defines the change in performance based
on two parameters. First, change in Accounting Quality of the firms, for which we used such
variables as; earnings management, and timely loss recognition. Secondly we measure the
performance of the firms based on changes on identified financial ratios of the firms. We tested
the impact of adoption as it relates to profitability, growth, leverage, and liquidity performance.
The paper utilizes secondary data to tests the effects of the adoption of IFRS on the performance
of the selected firms in Nigeria. Logit regression and t-test were used in the analysis. The paper
finds that variability of earnings has decreased from an average of 32624.4 to 14432.2 which
suggest that there was low variability in earnings in the post adoption period. Timely loss
recognition is the measure for prevalence of large negative earnings where large negative results
suggest that the loss recognition is not timely in the post adoption period. For our study we found
LNEG to be positive which signifies that IFRS firms recognize losses more frequently in the post
adoption period than they do in the pre adoption period, we therefore conclude that accounting
quality improves after the adoption of IFRS. Furthermore, under IFRS firms tend to exhibit
higher values on a number of profitability measures, such as earnings per share (EPS). It is our
recommendation that comprehensive implementation of the standard to its totality by firms
should be encouraged and regulatory authorities such as the Securities and Exchange
Commission, and external auditors should monitor strict compliance with the adoption and
provisions of the standards.

Keyword: IFRS Adoption, Earnings Management, Timely loss recognition, Performance, and
Nigerian Banks,

Introduction

International Financial Reporting Standards (IFRS) are a set of accounting standards developed
by the International Accounting Standards Board (IASB) that is becoming the global standard for
the preparation of public company financial statements. Kunle et al. (2011), observe that just like
every other system, IFRS is a systematic approach that promotes understandability, reliability,
relevance and comparability. However, unlike the generally accepted accounting standard
(GAAP) that has being in existence, the IASB is an independent accounting standard-setting
body, based in London. The Board consists of 15 members from nine countries, including the
United States. It began operations in 2001 when it succeeded the International Accounting
Standards Committee. It is funded by contributions from major accounting firms, private

Electronic copy available at: http://ssrn.com/abstract=2695573

financial institutions and industrial companies, central and development banks, national funding
regimes, and other international and professional organizations throughout the world (Adegbie
2011).

Approximately 110 nations and reporting jurisdictions permit or require IFRS for domestic listed
companies, although about 95 countries have fully conformed to IFRS as promulgated by the
IASB and include a statement acknowledging such conformity in audit reports (Zakari, 2010).
Most recent converts to the adoption of IFRS include Canada and Korea that transited to IFRS by
2011. Mexico will require IFRS for all listed companies starting in 2012. Japan has introduced a
roadmap for the adoption of the implementation with proposed adoption date of 2015 or 2016.
Still other countries have plans to converge their national standards with IFRS. In Nigeria, the
Nigerian stock exchange has mandated all companies listed on the stock exchange to get for the
adoption of IFRS since 2009.

Benzacar (2008) describe the IFRS as the official reporting standard which a business can
present its financial statements on the same basis as its foreign competitors, making comparisons
easier. Furthermore, Garuba and Donwa (2011) opined that it is glaring that to operate in the
modern day world economy and to fully realize the full gains of international listing, no
individual country can act alone in its financial reporting standards. Therefore, IFRS afford
companies with subsidiaries in countries that require or permit IFRS to be able to use one
accounting language company-wide. Companies also may need to convert to IFRS if they are a
subsidiary of a foreign company that must use IFRS, or if they have a foreign investor that must
use IFRS. Companies may also benefit by using IFRS if they wish to raise capital abroad
Kalavacherla (2010).

However, Armstrong, Barth, Jagolinzer, and Riedl, (2007), opined that despite a belief by some
of the inevitability of the global acceptance of IFRS, it is believe that GAAP is the gold standard,
and that a certain level of quality will be lost with full acceptance of IFRS. Furthermore, certain
companies without significant customers or operations outside their home countries may resist
IFRS because they may not have a market incentive to prepare IFRS financial statements. They
may believe that the significant costs associated with adopting IFRS outweigh the benefits.

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Controversies always existed over the suitability of applying IFRS in developing countries with
researchers such as Singh and Newberry (2008) and Chen et al. (2010) arguing that there exist
two schools of thought in this area. The first supports a single set of global standards as being
suitable for application. Barth, (2007), for instance, argues that by adopting a common body of
international standards, countries can expect to lower the cost of information processing and
auditors of financial reports can be expected to become familiar with one common set of
international accounting standards than with various local accounting standards. The second
opposes the use of IFRS. Barth et al. (2007) and Bartov et al. (2005) argue that there is no
conclusive evidence that standards have contributed to improvements in accounting quality.
Furthermore, it has been argued that one single set of accounting standards cannot reflect the
differences in national business practices arising from differences in institutions and cultures
(Armstrong, et al, 2007; Access Bank, 2010). In developing countries it has been argued that the
characteristics of local business environments and institutional frameworks determine the form
and contents of accounting standards. Nigeria and many developing countries are characterized
by weak institutions and volatile economic and political environments which are not very
conducive to assimilation of IFRS. In spite of the arguments, many countries and companies
have adopted IFRS and the need to evaluate their impact has been overwhelming. Barth et al.
(2007) indicate that accounting amounts results from interaction of features of the financial
reporting system which include accounting standards, their interpretations, enforcement, and
litigation and this obviously leads to obtaining different results from application of the same
standards. Ball et al. (2003) by extension argue that high quality standards like IFRS may also
lead to low quality accounting information depending on the incentives of the preparers. It is
these contradictions that led Ball et al. (2003) and others to conclude that poor preparer
incentives, underlying economic and political factors influence manager and auditors incentives
as opposed to accounting standards. Many factors have also been cited as impacting financial
reporting practices such as effective enforcement of standards and strong corporate governance.
Researches also presents mixed result as to whether the adoption of the standard improves the
performance of firms or not. Lantto and Sahlström (2009) for instance, present such results as the
adoption of IFRS affects financial ratios of firms in Finland. They found that liquidity ratios
decrease under IFRS, while leverage and profitability ratios increase.

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It is against this backdrop that, it became imperative to investigate the impact of the compliance
of firms in Nigeria with the provisions of the international financial reporting standards on the
quality of their financial reports. The paper also analyzed the effect of the adoption of the
standards on the performance of the firms quoted on the Nigerian stock exchange market. The
next section of the paper provides the literature review and section three the methodology is
discussed. Analyses were made in section four; while concluding remarks are made in section
five.

Literature Review

The decision to adopt IFRS is gaining momentum by the day as more countries embrace the
adoption. Generally, it is believed that the adoption arises from the understanding that IFRS is a
product with network effect. Iyoha and Jimoh (2011) observe that Network effect is said to exist
where users find a product or service more valuable as additional users use the same product or
service. Therefore, it is believed that as more and more countries adopt IFRS, it becomes more
appealing to others that are yet to consider the adoption. Although, a number of challenges have
been observed and experienced by countries in their decision to adopt IFRS, its worldwide
adoption has been promoted on the premise of its perceived benefits which are considered to
outweigh its disadvantages.

For this review, we classify the adoption of IFRS into two; those that are in support of the
adoption of the standard and those that oppose the adoption. The former, argue that there are a
number of benefits which can be gained from greater cross country comparability of firms’
financial reports. Barth, (2007), for instance, argues that by adopting a common body of
international standards, countries can expect to lower the cost of information processing and
auditors of financial reports can be expected to become familiar with one common set of
international accounting standards than with various local accounting standards. Kunle, Omoruyi
and Hamed (2011) posit that the adoption of IFRS will foster common benchmark in financial
information across international borders with the aim of generating greater momentum for
economic development.

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Deloitte (2010) examine the benefit of the adoption of IFRS on the performance of insurance
companies and concluded that there is the three building block approaches in the adoption of the
standard; the probability weighted estimates for future cash flow, discount rate risk adjustment
and residual margin for uncertainty. Generally, there is the possibility of future profits that will
cover the cost of the adoption of the standard. Adegbie (2010) in his study of the problems of
adopting IFRS in the Nigerian economy identified factors that militate against the adoption of the
standards; they include, lack of segment reporting system, lack of transparency, independence,
fairness, and accountability in the preparation of financial reports. Inability of Nigerian
companies to be listed in the international financial markets; and inability to access capital in the
international capital market because of varying accounting principles, standards and financial
reporting system. He further identified tax issue as a key element on the adoption of the
international standards as against the local standard. Zakari (2010) further, describe the non
adoption of the IFRS standard as a measure that will limit the acceptability of Nigerian
companies’ financial reports. This is because some terminologies in Nigerian statements of
accounting standards (SAS) are no longer being in use in the IFRS standard. For example, the
use of profit and loss account and balance sheet as against the statement of financial statement
and income statement used by the IFRS standards. Furthermore, end of reporting period is used
instead of balance sheet date used in the SAS.

Imhoff (2003) also describe the objective of the IFRS standards as a yardstick that enables
organizations to provide stakeholders with relevant, reliable and timely information and that such
information contributes towards the achievement of orderly capital markets around the world.
Adegbie (2011) describe IFRS standards as been accepted as the basis for reporting in major and
emerging international financial markets and included by the financial stability forum as one of
the key standards for sound financial system and used by the World Bank as part of its standards
and codes initiative. Generally speaking, the adoption of the IFRS in developing countries has
been viewed as a change in norms and standards. Price water coopers (2005) for instance,
describe the adoption of the standard as a move that will affect organizations in the way they
compute their taxable income. Ashbaugh and Pincus (2001) further argue that limiting
alternatives can increase accounting quality because doing so limits managements’ opportunistic
discretion in determining accounting amounts.

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Despite the mentioned advantages, critiques of the adoption of IFRS argue that there is no
conclusive evidence that standards have contributed to improvements in the reporting system and
accounting quality of firms (Barth et al. 2007 and Bartou et al. 2005). Armstrong et al. (2007)
and Access Bank, (2010) argue that one single set of accounting standards cannot reflect the
differences in national business practices arising from differences in institutions and cultures. In
countries where the quality of governance institutions is relatively high, IFRS adoption is likely
to be less attractive as high quality institutions represent high opportunity and switching costs to
adopting international accounting standards. However, in many developing countries, the quality
of local governance institutions are low and thus are important determinants of the decision to
adopt IFRS (Ball et al., 2000; Leuz et al., 2003; and Ball, 2006). Such countries are likely to
suffer from corrupt, slow-moving, or ineffectual governments that are resistant to or incapable of
change (La Porta et al., 1999).

Iyoha and Jimoh (2011), opposes the use of IFRS in developing countries by arguing that the
characteristics of local business environments and institutional framework determine the form
and contents of accounting standards. Outa (2011) describe the economy of developing nations
as being characterized by weak institutions and volatile economic and political environments
which are not very conducive to assimilation of the adoption of the IFRS standards. Barth et al
(2007) also describe IFRS standards as been of lower quality than the local standards.

Burgstahler et al. (2006) and Lang et al. (2006) posit that where firms are expected to apply the
same accounting standards, as the objective of IFRS tends to achieve may face the problem of
differences in reporting practices as a list of such problems have been documented across firms
and countries that adopt the IFRS standards. Fan and Wong, (2002); Leuz et al. (2003) and Haw
et al. (2004) emphasized the use of institutional reporting incentives as drivers of qualitative
financial reporting rather than the accounting standards in force. They documented the
significance of institutional incentives as a determining factor that affects firms’ actual reporting
and disclosure practices rather than the accounting standards.

Ball, (2001) noted that mandatory accounting rules and regulations such as the IFRS cannot be
considered in isolation of other relevant institutions because its (IFRS) effectiveness will depend

7
on the understanding of the economic and institutional factors that affect firms reporting
incentives. Daske et al. (2007) posits that, some firms, referred to as label adopters, claim that
they have adopted IFRS while the degree of adoption could be nil or low and sometimes
enforcement of such standards would be nonexistent.

A special study was conducted by the World Bank Group between November, 2003 and March,
2004 on the observance of standards and codes for Nigeria. As part of the aims of the project,
they examined the degree of compliance with national accounting standards and determine the
comparability of national accounting standards with International Accounting Standards (IASs).
In their study they observed that the SASs had not been reviewed or updated in line with the
current IFRSs (World Bank, 2004). The following was reported:

i. The Nigerian Statements of Accounting Standards (SAS) seem incomplete because there
are many accounting issues not yet covered by NASB but had been addressed by
IAS/IFRS. Also, the current SASs is based on old IASs which had been revised or
withdrawn. IASs with no equivalent SASs are: IAS 18, Revenue; IAS 20, Accounting for
Government Grants and Disclosure of Government Assistance; IAS 22, Business
Combinations; IAS 23, Borrowing Costs; IAS 32, Financial Instruments: Disclosure And
Presentation; IAS 34, IAS 35, Discontinuing Operations; IAS 36, Impairment of Assets;
IAS 38, Intangible Assets; IAS 39, Financial Instruments: Recognition And
Measurement; and IAS 41, Agriculture.
ii. Over the years, extensive revisions have been conducted on the IASs which are not being
reflected in the SAS. Large sections and paragraphs in IAS which are newly included
cannot be found in the SAS. For instance, some requirements in IAS 1, Presentation of
financial statements are omitted from SAS. These are: statements of changes in equity,
distinctions between current and noncurrent classifications, information to be presented
on the face of the balance sheet, income statement and notes to the financial statements
and their structure, true and fair override, restricted cash, concession arrangements, and
development stage enterprises.
iii. There is no requirement to adopt the IASs in areas where the Nigerian Accounting
Standards Board has not issued standards. Although some preparers of financial

8
 statements have applied some IAS/IFRS where there is a gap, but this does not denote
full compliance with all requirements of IAS/IFRS and related interpretations.
iv. Review of 45 sets of financial statements (including 8 banks and 2 insurance companies)
of listed companies reveals there are some compliance gaps between local accounting
standard and actual practice. Disclosures by some companies are insufficient. For
instance, cash flow statements of some companies do not include reconciliation of
amounts in the statements with the equivalent items reported in the balance sheets. It is
also seen that most entities do not disclose their ultimate parent, associated or affiliated
companies, and their relationships with significant local and overseas suppliers or
customers.
v. Banks are observed to comply generally with national accounting standards but
transparency and disclosures seem inadequate. They exhibit weak risk management and
weak governance practices that make it difficult to detect problems early.

Empirically, in comparing domestic standards to IFRS, some studies have shown that there are
no significant differences in accounting results with the implication that the adoption of IFRS
does not result in better accounting quality. Studies in Germany by Tendeloo and Vanstraelen
(2005) and Hung and Subramanyam (2007) did find similarities in earnings management and
value relevance in comparing results of the national and international standards. Leuz, Nanda
and Wysocki (2003) concluded that evidence was adduced to the effect that a large frequency of
small positive earnings is an indication of managing towards positive earnings. The conclusion
from this and other similar studies was that firms applying IAS report small positive earnings
with lower frequency. Paananen (2008) reports no quality increases in the Swedish case and
Elbannan (2011) reports mixed findings in Egypt.

Accounting literature has operationalized accounting quality on the basis of earnings

management, timely loss recognition and value relevance metrics. The higher disclosure
requirements and financial reporting quality that stem from IFRSs imply that the adoption of
IFRSs would give a positive signal to investors as information asymmetry and agency costs tend
to diminish (Tarca, 2004). It appears, therefore, that firms that adopt IFRSs would tend to display
lower potential for earnings management (Leuz and Verrecchia, 2000; Ashbaugh, 2001;

9
Ashbaugh and Pincus, 2001; Leuz, 2003). Less subjectivity would lead to fewer opportunities to
influence reported earnings and bonuses and/or mislead investors. Hence, in countries with
strong investor protection mechanisms, such as the UK, the costs of IFRS adoption would tend to
be lower because the level of earnings management is lower as managers are less inclined to
manipulate the reported accounting figures (Nenova, 2003; Dyck and Zingales, 2004; Renders
and Gaeremynck, 2007). In contrast, in countries with weak investor protection mechanisms, the
scope for earnings management would tend to be higher and the quality of financial reporting
lower, implying that the costs of adopting IFRSs would be higher (Ali and Hwang, 2000; Hung,
2001).

The second aspect of the paper also considers the impact of the adoption of IFRS standard on the
performance of Nigerian firms. Studies in this area have also been conducted for instance,
Iatridis (2010), finds that IFRS implementation has favorably affected the financial performance
of firms in the United Kingdom with profitability and Growth as the main ratios tested.
Blanchette (2011) also found return on assets and return on equity to improve with IFRS
adoption in Canada. Furthermore, Lantto and Sahlström (2009) investigated the impact of IFRS
on financial ratios in Finland, by comparing ratios calculated under IFRS and Finnish GAAP for
the same time period – the year 2004. The authors found that liquidity ratios decrease under
IFRS, while leverage and profitability ratios increase. Liquidity ratios decrease primarily due to
additional current liabilities that result from lease accounting under IFRS (IAS 17). Leverage
ratios increase as more liabilities are recognized under IFRS; these liabilities result from lease
accounting (IAS 17), employee benefit obligations (IAS 19) and financial instruments (IAS 32
and 39). Profitability ratios increase because profit is higher under IFRS due primarily to
business combinations (IFRS 3) and the combined effects of several other standards.

One may ask, why the adoption of IFRS standard should affects the performance of a firm and or
the quality of its accounting reports. We discussed the major differences that make the adoption
of the IFRS standard unique and possibly why it should produce different results from that of the
home country’s GAAP. One specific example of the differences is that the International
Financial Reporting Standards (IFRS), prohibits the use of Last-In-First-Out (LIFO) for
inventory purposes (The unification of international accounting standards, 2007). LIFO is an

10
asset-management and valuation method that assumes that all assets acquired last are the ones
that are used, sold, or disposed of first. Selling an asset for less than its initial cost constitutes a
capital loss; selling an asset for more than its initial cost constitutes a capital gain. Using LIFO to
manage inventory can be tax advantageous but may also increase tax liability (Last in first out –
lifo, 2010).

IFRS also differs from GAAP in the way they measure long term assets. Under IFRS, companies
are allowed to measure property, plant, and equipment at fair value instead of book value. This is
a very different procedure in comparison to GAAP. This different measurement requirement
could have a significant effect on debt-to-equity and other balance sheet ratios.

A further major difference between IFRS and GAAP are characteristics defining equity and debt.
GAAP requires entities to reassess whether an embedded derivative should be separated at the
end of each reporting period, while IFRS only requires this if there is a change in the terms that
significantly modifies the cash flows. Also, GAAP requires non-current presentation of defaulted
debt if a waiver is granted before the settlement issuance date, while the IFRS requires this after
the balance sheet date only (Epstein, 2008). GAAP allows convertible debt to be recorded as
long-term debt; while the IFRS records convertible bonds separately into the equity component
and the debt component.

Methodology

The aim of this research work is to investigate the effect of compliance of firms in Nigeria with
the provisions of the international financial reporting standards on the performance of firms
quoted on the Nigerian stock exchange market. The paper defines the change in performance
based on two parameters. First, the change in Accounting Quality of the firms, this is based on
the IASB framework that defined accounting quality with such key components of relevance,
reliability, understandability, and comparability (IFRS 2006). The variables used include those
earlier variables applied in the literature, as per Barth et al. (2007), Christensen et al. (2008) and
Oupa (2011). They are earnings management, and timely loss recognition. These variables were
used in testing the accounting quality. It is expected that, firm with higher quality earnings
exhibit less earnings managements, and more timely loss recognition. Secondly we measure the

11
performance of the firms based on changes on identified financial ratios of the firms. Here the
study examines the financial statement changes following the adoption of IFRS standard. Based
on studies, such as Harris and Muller (1999) and Leuz (2003), we tested the impact of adoption
as it relates to profitability, growth, leverage, and liquidity performance.

The population of the paper is the entire stock market of the Nigerian economy. This includes
two hundred and twelve companies that cut across different sectors of the economy. The paper
sampled the banking industry for the fact that they face more challenge of internationalization.
Apart from their need for quotation at international capital markets they also have the challenge
of investments and subsidiaries abroad they may call for consolidation of their financial report.
Consistent with Long et al (2003) and Outa (2011) on constructing the matched sample, we
chose a period of two years before the adoption of the standards and two years after the adoption.
We therefore used the period 2007 to 2008 before adoption and 2009 to 2010 after the adoption.
The following banks were therefore used in the analysis: First Bank of Nigeria, Plc, Guaranty
Trust Bank Plc, Zenith Bank, Plc, Access Bank Plc, and EcoBank Transnational International
(ETI). Incidentally, they were the ones that meet up with the period selected for the paper.
Quantitative methods were used to collect secondary data related to financial reports of these
banks. Information collected was sourced from the firms’ reports on revenues, income, balance
sheet and cash flow statement. SPSS was used in the analysis of the Data collected.

Variables tested on the Performance

There are two kinds of earnings management; Earnings Smoothing and Managing towards Small
Positive Earnings as explained in Barth et al. (2007); Bello (2006); Lang et al. (2003) and Leuz
et al. (2003). The First, Earnings Smoothing is measured by: (a) variability of changes in
earnings, (b) variability of changes in earnings relative to the variability of changes in cash flow
and (c) negative correlation between accruals and cash flows. The second kind of earnings
management is managing towards small positive earnings and this is done because management
prefers to report small positive net income rather than negative net income. Barth et al. (2007),
Bello (2006) and Outa (2011).

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 (a) Variability of changes in Earnings: A small variance of the change in net income is
interpreted as evidence of earnings smoothing and could be affected by other factors
unrelated to earnings smoothing. To mitigate against these factors, the measure of
earnings variability is the variance of the residuals from the regression of change in net
income on control variables identified in prior research. In line with Barth et al. (2007)
and Oupa (2011) residuals from regression equations are:

∆NIit = α0 + α1 SIZEit+ α2GROWTHit + α3EISSUEit + α4LEVit + α5DISSUEit+ α6 TURNit

+ α7CFit+ α8 AUDit+ α9XLISTit+ α10CLOSEit ∑6k=0 αk+10 + εii Equation 1

Where: ∆NIit -Change in annual earnings (based on end of year total assets) for firm I year t.
SIZE-is the natural logarithm of market value of equity in millions of Naira as of yearend
GROWTH-Annual % of change in Gross Earnings
EISSUE-annual % change in common stock
LEV-end year total liabilities divided by end year book value of equity
DISSUE-annual % change in total liabilities
TURN-Turnover divided by end of year total assets
CF-Annual net cash flow from operating activities scaled by end of year total assets
AUD-an indicator that equals 1 if the auditor of the firm is one of the large international
accounting firms
XLIST-an indicator that equals 1 if the firm is listed on any International stock exchange
CLOSE-% of closely held shares

Figures in the pre and post adoption period for the N1 were computed and regressed against the
controls.

(b) Variability of ∆NI over ∆CF: Generally, firms with more volatile cash flows typically
have volatile net income. The principle behind this measure is that when firms use
accruals to manage earnings, then variation in income should be lower than that of
operating cash flows.

∆CFit = α0 + α1 SIZEit+ α2GROWTHit + α3EISSUEit + α4LEVit + α5DISSUEit+ α6 TURNit

+ α7CFit+ α8 AUDit+ α9XLISTit+ α10CLOSEit ∑6k=0 αk+10 + εii Equation 2

Where:
∆CFit -change in annual net cash flow from operations (based on end of year total assets) for
firm i year t. Like ∆N, ∆CF can also be affected by other factors outside IFRS hence the need for
∆CF as dependent variable.

(c) Correlation of Accruals to Cash flow: it is expected that firms with less earnings
smoothing exhibit a more negative correlation between accruals and cash flows because
accruals reverse over time and are generally negatively correlated to cash flows.

CFit = α0 + α1 SIZEit+ α2GROWTHit + α3EISSUEit + α4LEVit + α5DISSUEit+ α6 TURNit

+ α7 AUDit+ α8XLISTit+ α9CLOSEit + εii Equation 3

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 ACCit = α0 + α1 SIZEit+ α2GROWTHit + α3EISSUEit + α4LEVit + α5DISSUEit+ α6 TURNit
+ α7 AUDit+ α8XLISTit+ α9CLOSEit + εii Equation 4

Where
CFit-Annual net cash flow from operating activities scaled by end of year total assets for firm i
year t.
ACCit-earnings less cash flow from operating activities (scaled by end of year total assets) for
firm i year t.

All the metrics in pre and post adoption period will be calculated separately and tested for
statistical significance per Barth et al. (2007) by applying t-test based on the empirical
distribution of the differences.

Earnings Management towards a Target (Small Positive Earnings)

Small positive earnings -NI (SPOS)

Post- adoption

POST(0,1)it = α0 + α1SPOSit + α2SIZEit+ α3GROWTHit + α4EISSUEit + α5LEVit +

α6DISSUEit+ α7 TURNit + α8CFit + α9 AUDit+ α10XLISTit+ α11CLOSEit∑6k=0 αk+11 + εii
Equation 5

Where: POST (0, 1) is an indicator variable that equals one for observations in the post-adoption
period and zero otherwise. SPOS is an indicator variable that equals one for observations where
net income scaled by total assets is between zero and .01. A negative coefficient on SPOS
suggests that firms manage less towards a small positive target in the post adoption period.

Interpretation:

A negative coefficient on SPOS indicates that IAS firms manage earnings towards small positive
amounts more frequently in the pre adoption period than they do in the post adoption period.

Timely Loss Recognition

Timely loss recognition relate to an organization’s ability to recognize losses as they occur by
not engaging in activities that reschedule the losses to other periods. It is measured as coefficient
on large negative net income (LNEG) in the regressions equation 6 and 7. Studies by Lang,
Raedy and Yetman (2003) suggest that higher quality earnings report losses when they occur
instead of being deferred to future periods.

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Large Negative Income (Equation 6 and 7)

Equation 7 (Pre adoption)

IAS (0,1)it = = α0 + α1LNEGit + α2SIZEit+ α3GROWTHit + α4EISSUEit + α5LEVit +
α6DISSUEit+ α7 TURNit + α8CFit + α9 AUDit+ α10XLISTit+ α11CLOSEit + εii Equation 6

(Post adoption)
POST(0,1)it = α0 + α1LNEGit + α2SIZEit+ α3GROWTHit + α4EISSUEit + α5LEVit +
α6DISSUEit+ α7 TURNit + α8CFit + α9 AUDit+ α10XLISTit+ α11CLOSEit ∑6k=0 αk+11 + εii
Equation 7

Where: LNEG is an indicator variable that equals one for observations in which annual net
income scaled by total assets is less than -0.20 and Zero otherwise. A positive coefficient on
LNEG suggests that IFRS firms recognize large losses more frequently in the post adoption
period than they do in the pre adoption period.

On the second analysis on the impact of the adoption of IFRS as it relates to profitability, growth,
leverage, and liquidity performance. Below is the logistic regression that is employed, a dummy
variable is used as the dependent variable, which is dichotomous and takes two values, i.e. 1 for
firms reporting IFRS-restated financial numbers in the period stated and 0 for (the same set of)
firms reporting their accounting figures under the Nigerian GAAP.

The study uses the following logit model:

RRi,t = a0 + a1 Profitabilityi,t + a2 Growthi,t + a3 Leveragei,t + a4 Liquidityi,t + a5 Sizei,t + ei,t
Equation 8

where
RRi,t is a dummy variable representing the regulatory regime.
RRi,t = 1 for financial numbers reported under IFRSs and
RRi,t = 0 for financial numbers reported under the Nigerian GAAP,

Profitabilityi,t; Growthi,t ; Leveragei,t ; Liquidityi,t ; Sizei,t ; Investmenti,t

are proxies used to control for firm profitability, growth, leverage, liquidity, size and investment
respectively, as presented below: ei,t is the error term.

Data Analysis

Table 1 represents the descriptive statistics for the main variables, comparing the pre-and-post
adoption eras of IFRS using the main variables. ∆NI decreased from an average of 32624.4 to
14432.2 which implies a sharp reduction in the annual earnings with respect to the total asset.
15
Similarly, CF also decreased from an average of 16.39 to 5.42 after the adoption of the IFRS;
this implies a reduction on the annual net cash flow from operating activities scaled by end of
year total asset, among others. This comparison is better done using the inferential statistics so
that the sample statistics could be extended to the population. From table 2 below, we can have
proper comparisons of the main variables for the pre-and-post adoption eras of IFRS using the t-
test. The impact of IFRS adoption has been significantly noticed in CF, P and BVEPS since their
p-values are 0.028, 0.018 and 0.015 respectively. On the other hand, the impact of IFRS adoption
was not significant in NI, ACC, NI/P and NIPS since their p-values are 0.215, 0.882, 0.508 and
0.060 respectively; each greater than 0.05.

Table 3 represents the descriptive statistics for the control variables with regards to IFRS
adoption. The LEV decreased from 106.02 to 81.31 which imply that IFRS adoption has
contributed to the reduction of liabilities in the firms. Similarly, the GROWTH decreased from
74.04 to 20.10 which imply a more stable change in the annual gross earnings as a result of IFRS
adoption. EISSUE declined from an average of 42.40 to 27.75 after IFRS adoption which
connotes a reduction in the annual percentage change in common stock. DISSUE also declined
from an average of 77.87 to 26.66 signifying a sharp reduction in the annual percentage change
in total liabilities, among others.

Similarly, from table 4 above, we can have proper comparisons of the control variables for the
pre-and-post adoption eras of IFRS using the t-test. The impact of IFRS adoption has been
significantly noticed in GROWTH, DISSUE and CF since their p-values are 0.004, 0.014 and
0.028 respectively. On the other hand, the impact of IFRS adoption was not significant in LEV,
EISSUE and SIZE since their p-values are 0.100, 0.306, 0.508 and 0.971 respectively; each
greater than 0.05.

Table 1: Descriptive Statistics for Main Variables

IFRS
Adoption Descriptives ∆NI CF ACC ∆CF NI/P P BVEPS NIPS
Pre N 10 10 10 10 10 10 10 10
adoption Mean 32,624.40 16.39 11.68 38,224.50 1,915.5 24.04 6,506.0 1.77
Median 25,428.00 15.95 11.00 49,552.00 1,373.2 22.00 6,039.0 1.60
Std. Dev. 26,484.33 17.15 2.27 235,532.48 1,586.3 13.94 2,698.7 1.33
Skewness 2.27 -0.18 1.54 -0.65 0.72 0.36 0.40 0.51
Post N 10 10 10 10 10 10 10 10

16
adoption Mean 14,432.20 5.42 11.49 69,463.50 1,193.3 12.10 10,558.7 0.88
Median 8,953.00 3.95 11.65 45,555.50 706.7 13.67 10,491.0 0.88
Std. Dev. 36,029.18 23.32 3.26 132,500.62 2,987.4 4.25 3,941.5 0.48
Skewness 0.42 -1.66 -0.21 1.082 0.44 -0.84 -0.14 -0.12

Table 2: Inferential Statistics for Main Variables

Variable t df Sig. (2-tailed) Mean Difference SE of Diff.
∆NI 1.287 18 0.215 18192.20 14140.45
CF 2.383 18 0.028 21.81 9.15
ACC 0.151 18 0.882 0.19 1.26
NI/P 0.675 18 0.508 722.32 1069.62
P (N) 2.592 18 0.018 11.95 4.61
BVEPS (Nm) -2.683 18 0.015 -4052.70 1510.57
NIPS (N) 2.007 18 0.060 0.90 0.45

Table 3: Descriptive Statistics for the Control Variables

IFRS GROWTH EISSUE DISSUE
Adoption Descriptives LEV (%) (%) (%) SIZE CF
Pre N 10 10 10 10 10 10
adoption Mean 106.02 74.04 42.40 77.87 26.20 16.39
Median 107.85 66.65 41.65 57.05 26.16 15.95
Std. Deviation 41.16 29.02 34.48 56.33 0.53 17.15
Skewness -0.32 0.09 -0.08 1.19 -0.05 -0.18
Post N 10 10 10 10 10 10
adoption Mean 81.31 20.10 27.75 26.66 26.11 5.42
Median 83.70 7.70 25.00 22.60 26.47 3.95
Std. Deviation 18.37 42.30 27.34 19.53 0.79 23.32
Skewness -0.21 1.15 1.57 0.46 -0.89 -1.66

Table 4: Inferential Statistics for the Control Variables

Variable t df Sig. (2-tailed) Mean Difference SE of Diff.
LEV 1.734 18 0.100 24.71 14.25
GROWTH 3.325 18 0.004 53.94 16.22
EISSUE 1.053 18 0.306 14.65 13.92
DISSUE 2.716 18 0.014 51.21 18.85
SIZE 0.317 18 0.755 0.10 0.30

17
CF 2.383 18 0.028 21.81 9.15
Regression analysis

The results for the regression analysis are presented below:

Equation 1
Table 1a: Model Coefficients for Equation 1

Adoption period Variables Coefficients Std. Error t Sig.

Before (Constant) -104785.5 35495.4 -4.952 0.006

SIZE (NM) 0.18 0.07 5.595 0.018
GROWTH (%) 1274.7 722.6 3.764 0.020
EISSUE (%) -65.6 456.6 -3.143 0.049
LEV 130.6 156.9 5.832 0.040
DISSUE (%) 113.7 254.0 4.447 0.039
CF -1478.2 1033.0 -6.431 0.002

After (Constant) -45716.2 27601.6 -5.656 0.009

SIZE (NM) -0.07 0.07 -4.921 0.002
GROWTH (%) 778.8 224.6 3.466 0.040
EISSUE (%) 43.9 222.2 3.198 0.036
LEV 781.3 478.5 4.633 0.001
DISSUE (%) -27.4 504.2 -5.054 0.011
CF 183.3 364.1 6.503 0.001

Table 1b: Model Summary for Equation 1

Std. Error of the Residual

Adoption period R R Square Estimate Variance

Before adoption of standards 0.944 0.891 15,125.292 228774450.8

18
After adoption of standards 0.972 0.945 14,624.079 213863687.2

Equations 1 for the two periods were obtained from table 1a as follows:

Before adoption of standards:

∆NIit=-104785.5+0.18SIZEit+1274.7GROWTHit-65.6EISSUEit+130.6LEVit+113.7DISSUEit-
1478.2CFit

After adoption of standards:

∆NIit=-45716.2-0.07SIZEit+778.8GROWTHit-43.9EISSUEit+781.3LEVit-27.4DISSUEit-
183.3CFit

Again, from the p-values of the t-test in the last column of table 1a, all the parameters are
statistically significant since each p-value is less than 0.05. From table 1b, R-square values of
0.891 and 0.945 signify excellent prediction powers of the models for before and after adoption
of the standards respectively. Furthermore, the measures of earning variability in the last column
of table 1b, for before and after adoption of standards are 228774450.8 and 213863687.2
respectively; which shows less earning variability after the adoption of standards. Hence, the
adoption of standards has stabilized earnings.

Equation 2

Table 2a: Model Coefficients for Equation 2

Adoption period Variables Coefficients Std. Error t Sig.

Before (Constant) -512409.0 844103.7 -0.607 0.587

SIZE (NM) 0.96 1.60 4.598 0.042
GROWTH (%) 10618.2 17185.8 0.618 0.580
EISSUE (%) -5228.6 10858.8 -0.482 0.663

19
 LEV -793.5 3731.7 -0.213 0.845
DISSUE (%) 1904.1 6040.3 3.315 0.030
CF -20588.2 24566.1 -0.838 0.464

After (Constant) 8449.0 411991.6 0.021 0.985

SIZE (NM) 0.16 1.09 4.143 0.045
GROWTH (%) -387.8 3353.1 -0.116 0.915
EISSUE (%) -321.4 3316.9 -0.097 0.929
LEV -504.0 7142.4 -0.071 0.948
DISSUE (%) 2921.1 7526.7 0.388 0.041
CF 408.9 5434.4 0.075 0.945

Table 2b: Model Summary for Equation 2

Std. Error of the

Adoption period R R Square Estimate

Before adoption of standards 0.687 0.472 359,688.455

After adoption of standards 0.556 0.309 218,284.161

Equations 2 for the two periods were obtained from table 2a as follows:

Before adoption of standards:

∆CFit=-512409.0+0.96SIZEit+10618.2GROWTHit-5228.6EISSUEit-
793.5LEVit+1904.1DISSUEit-20588.2CFit

After adoption of standards:

∆CFit=8449.0+0.16SIZEit-387.8GROWTHit-321.4EISSUEit-
504.0LEVit+2921.1DISSUEit+408.9CFit

Again, from the p-values of the t-test in the last column of table 2a, some of the parameters are
statistically significant. Since some of the p-values are less than 0.05. From table 2b, R-square

20
values of 0.472 and 0.309 signify weak prediction powers of the models for before and after
adoption of the standards respectively.

Equation 3
Table 3a: Model Coefficients for Equation 3

Adoption period Variables Coefficients Std. Error t Sig.

Before (Constant) -21.3 13.4 -4.852 0.007

SIZE (NM) 0.003 0.001 5.443 0.028
GROWTH (%) 0.572 0.201 3.614 0.020
EISSUE (%) -0.329 0.147 -3.430 0.049
LEV -0.009 0.076 -5.800 0.040
DISSUE (%) 0.018 0.123 4.447 0.039

After (Constant) -25.6 35.6 -6.431 0.002

SIZE (NM) 0.002 0.001 5.656 0.008
GROWTH (%) -0.358 0.251 -4.911 0.003
EISSUE (%) 0.336 0.255 3.466 0.040
LEV -0.407 0.625 -3.198 0.041
DISSUE (%) 0.626 0.618 4.613 0.001

Table 3b: Model Summary for Equation 3

Std. Error of the

Adoption period R R Square Estimate

Before adoption of standards 0.959 0.919 7.3208

After adoption of standards 0.877 0.770 20.0835

Equations 3 for the two periods were obtained from table 3a as follows:

21
Before adoption of standards:

CFit=-21.3+0.003SIZEit+0.572GROWTHit-0.329EISSUEit-0.009LEVit+0.018DISSUEit

After adoption of standards:

CFit=-25.6+0.002SIZEit-0.358GROWTHit-+0.336EISSUEit-0.407LEVit+0.626DISSUEit

Again, from the p-values of the t-test in the last column of table 3a, all the parameters are
statistically significant since each p-value is less than 0.05. From table 3b, R-square values of
0.919 and 0.770 signify excellent prediction powers of the models for before and after adoption
of the standards respectively.

Equation 4

Table 4a: Model Coefficients for Equation 4

Adoption period Variables Coefficients Std. Error T Sig.

Before (Constant) 14.7 5.852 4.513 0.011

SIZE (NM) -0.006 0.001 -3.619 0.022
GROWTH (%) 0.034 0.087 4.386 0.020
EISSUE (%) -0.026 0.064 -3.403 0.049
LEV 0.001 0.033 5.032 0.001
DISSUE (%) -0.032 0.053 -.3602 0.039

After (Constant) 11.3 6.059 2.858 0.050

SIZE (NM) -0.002 0.000 -3.590 0.041
GROWTH (%) -0.005 0.043 -4.129 0.003
EISSUE (%) 0.024 0.043 3.553 0.040
LEV 0.102 0.106 3.961 0.042
DISSUE (%) -0.105 0.105 -2.998 0.049

22
Table 4b: Model Summary for Equation 4

Std. Error of the

Adoption period R R Square Estimate

Before adoption of standards 0.849 0.719 3.1807

After adoption of standards 0.857 0.734 3.4115

Equations 4 for the two periods were obtained from table 4a as follows:

Before adoption of standards:

ACCit=14.7-0.006SIZEit+0.034GROWTHit-0.026EISSUEit+0.001LEVit-0.032DISSUEit

After adoption of standards:

ACCit=11.3-0.002SIZEit-0.005GROWTHit-+0.024EISSUEit+0.102LEVit-0.105DISSUEit

Again, from the p-values of the t-test in the last column of table 4a, all the parameters are
statistically significant since each p-value is less than 0.05. From table 4b, R-square values of
0.719 and 0.734 signify excellent prediction powers of the models for before and after adoption
of the standards respectively.

Equation 5

Table 5a: Model Coefficients for Equation 5

Variables Coefficients Std. Error Wald Sig.

(Constant) 244.4 49979.9 0.996 0.000

SPOS(0,1) 125.7 26900.6 0.996 0.000
SIZE (NM) 0.001 0.040 0.998 0.000
GROWTH (%) -0.37 132.5 0.998 0.000
EISSUE (%) -2.09 375.0 0.996 0.000

23
LEV -2.28 346.3 0.995 0.000
DISSUE (%) -1.29 514.0 0.998 0.000
CF 0.43 901.5 1.000 0.000

Table 5b: Model Summary for Equation 5

Model fit Cox & Snell R Square Nagelkerke R Square

Measures 0.750 1.000

Equation 5 is a binary logistic model because of the dummy response variable and is obtained
from table 5a as follows:

ln (POST (0,1)it/1- POST(0,1)it)=244.4+125.7SPOSit+0.001SIZEit-0.37GROWTHit-

2.09EISSUEit-2.28LEVit-1.29DISSUEit +0.43CFit

Again, from the p-values of the Wald test in the last column of table 5a, all the parameters are
statistically significant since each p-value is less than 0.05. From table 5b, Cox R-square value of
0.750 signifies excellent prediction powers of the model. Furthermore, since the coefficient of
SPOS is positive, firms manage earnings towards small positive amounts more frequently in the
post-adoption period than they do in the pre-adoption period.

Equation 6
Table 6a: Model Coefficients for Equation 6

Variables Coefficients Std. Error Wald Sig.

(Constant) -14.6 20788.6 0.999 0.000

LNEG(0,1) 22.6 20788.6 0.218 0.000
SIZE (NM) 0.001 0.001 0.332 0.000
GROWTH (%) 0.038 0.039 0.488 0.000
EISSUE (%) -0.025 0.036 0.400 0.000

24
LEV -0.028 0.033 0.134 0.000
DISSUE (%) -0.102 0.068 0.147 0.000
CF 0.105 0.072 0.999 0.000

Table 6b: Model Summary for Equation 6

Model fit Cox & Snell R Square Nagelkerke R Square

Measures 0.764 0.962

Equation 6 is a binary logistic model because of the dummy response variable and is obtained
from table 6a as follows:

ln (IAS (0,1)it/1- IAS(0,1)it)=-14.6+22.6LNEGit+0.001SIZEit+0.038GROWTHit-0.025EISSUEit-

0.028LEVit-0.102DISSUEit +0.105CFit

Again, from the p-values of the Wald test in the last column of table 6a, all the parameters are
statistically significant since each p-value is less than 0.05. From table 6b, Cox R-square value of
0.764 signifies excellent prediction powers of the model.

Equation 7

Table 7a: Model Coefficients for Equation 7

Variables Coefficients Std. Error Wald Sig.

(Constant) 7370.4 91738.9 .939 .006

LNEG(0,1) 3691.1 48426.4 .935 .007
SIZE (NM) 0.013 0.160 .937 .006

25
GROWTH (%) -5.29 66.8 .935 .007
EISSUE (%) -26.1 318.4 .935 .007
LEV -75.5 926.8 .936 .006
DISSUE (%) 23.0 286.3 .935 .007
CF -197.8 2433.0 .936 .006

Table 7b: Model Summary for Equation 7

Model fit Cox & Snell R Square Nagelkerke R Square

Measures 0.750 1.000

Equation 7 is a binary logistic model because of the dummy response variable and is obtained
from table 7a as follows:

ln (POST (0,1)it/1- POST(0,1)it)=7370.4 -3691.1LNEGit+0.013SIZEit-5.29GROWTHit-

26.1EISSUEit-75.5LEVit+23.0DISSUEit -197.8CFit

Again, from the p-values of the Wald test in the last column of table 7a, all the parameters are
statistically significant since each p-value is less than 0.05. From table 7b, Cox R-square value of
0.750 signifies excellent prediction powers of the model.

Equation 8

Table 8a: Model Coefficients for Equation 8

Variables Coefficients Std. Error Wald Sig.

(Constant) 0.715 2.583 0.077 0.000

MVBV -0.144 0.121 1.419 0.001
EPS -1.765 1.513 1.360 0.001
CFSH 0.001 0.001 1.508 0.000

26
TLSFU 0.001 0.001 2.692 0.000

Table 8b: Model Summary for Equation 8

Model fit Cox & Snell R Square Nagelkerke R Square

Measures 0.722 0.896

Equation 8 is a binary logistic model because of the dummy response variable and is obtained
from table 8a as follows:

ln (RR (0,1)it/1- RR (0,1)it)=0.715-0.144MVBVit-1.765EPSit+0.001CFSHit+0.001TLSFUit

Again, from the p-values of the Wald test in the last column of table 8a, all the parameters are
statistically significant since each p-value is less than 0.05. From table 8b, Cox R-square value of
0.722 signifies good prediction powers of the model.

Findings

The variability of earnings has decreased from an average of 32624.4 to 14432.2 which suggest
that there was low variability in earnings in the post adoption period. The use of this measure is
based on the fact that less managed earnings show higher variability as opposed to managed
earnings where there is tendency to portray regular predetermined numbers. The arguments
extend into IFRS reporting where it is argued that because of their ability to minimize
managerial discretion, earnings reported under this regime tend to have higher variability as
opposed to earnings reported under non IFRS. The variability of change in NI over change in
cash flow declined from an average of 0.472 to 0.309, correlation of accruals to cash flow
declined from 0.919 to 0.770. The implication of these findings is that accounting quality
improved in the post adoption period. Although this findings is not consistent with the findings
of Paananen (2008) on the Swedish economy, the study lend support to other researches that
documented improvements in the variability of earnings for instance; the studies of Tendeloo and

27
Vanstraelen (2005) and Hung & Subramanyam (2007) on the economy of Germany. Even
though, Elbannan (2011) reports mixed findings in the adoption of firms in Egypt.

Timely loss recognition is the measure for prevalence of large negative earnings where large
negative results suggest that the loss recognition is not timely in the post adoption period. For
our study we found LNEG to be positive which signifies that IFRS firms recognize losses more
frequently in the post adoption period than they do in the pre adoption period. This finding is
therefore consistent with the findings and prediction of Barth et al (2007) and it indicates that
IFRS adoption results to improvement in accounting quality. Even though, Outa (2011) did not
document any improvement as to timely loss recognition for firms that adopt IFRS.

The adoption of IFRSs does not appear to adversely affect firm profitability. Under IFRSs, firms
tend to exhibit higher values on a number of profitability measures, such as earnings per share
(EPS). The higher profitability that is reported under IFRSs enables firms to distribute higher
dividends to their shareholders as shown by the positive coefficient of dividend per share
(DIVSH). The fair value orientation of IFRSs has led to a higher market to book value ratio
(MVBV) under IFRSs. Table 8 also shows that, under IFRSs, firms tend to display higher
leverage measures, i.e. long-term liabilities to capital employed (LTLCE), and total liabilities to
shareholders’ funds (TLSFU). The higher quality of IFRS financial reporting would enhance the
credibility of firm financial statements, and would in turn provide lenders with more certainty
and information about the ability of firms to timely meet their financial obligations, leading thus
to better borrowing terms. Following the higher leverage measures and financial obligations that
are reported for the IFRS era, Table 8 displays that firms consequently tend to exhibit lower
liquidity, as shown by the coefficient of cash flow per share (CFSH). Therefore, IFRS
implementation has positively affected the overall financial performance and position of firms as
key financial figures, such as profitability and growth, appear to be higher after the
implementation. This is consistent with the findings of Iatridis (2010), who finds that IFRS
implementation has favorably affected the financial performance of firms in the United
Kingdom. Blanchette (2011) also found profitability and growth to improve with IFRS adoption
in Canada.

28
Conclusion and Recommendation

This paper assesses the effect of compliance with the regulation and provisions of the
international financial reporting standards on the performance of some selected Nigerian banks
that are quoted on the Nigerian stock market. The paper defines the change in performance based
on two parameters. First, change in Accounting Quality of the firms, for which we used such
variables as; earnings management, and timely loss recognition. Secondly we measure the
performance of the firms based on changes on identified financial ratios of the firms. Here the
study examines the financial statement changes following the adoption of IFRS standard. We
tested the impact of adoption as it relates to profitability, growth, leverage, and liquidity
performance. The paper utilizes secondary data to tests the effects of the compliance with these
provisions on the performance of the selected firms in Nigeria. Logit regression and t-test were
used in the analysis. The results show that ∆NI decreased from an average of 32624.4 to 14432.2
which implies a sharp reduction in the annual earnings with respect to the total asset.

Similarly, CF also decreased from an average of 16.39 to 5.42 after the adoption of the IFRS;
this implies a reduction on the annual net cash flow from operating activities scaled by end of
year total asset, among others. Similarly, the GROWTH decreased from 74.04 to 20.10 which
imply a more stable change in the annual gross earnings as a result of IFRS adoption. EISSUE
declined from an average of 42.40 to 27.75 after IFRS adoption which connotes a reduction in
the annual percentage change in common stock. DISSUE also declined from an average of 77.87
to 26.66 signifying a sharp reduction in the annual percentage change in total liabilities, among
others. The impact of IFRS adoption has been significantly noticed in GROWTH, DISSUE and
CF since their p-values are 0.004, 0.014 and 0.028 respectively. On the other hand, the impact of
IFRS adoption was not significant in LEV, EISSUE and SIZE since their p-values are 0.100,
0.306, 0.508 and 0.971 respectively; each greater than 0.05. Furthermore, the measures of
earning variability for before and after adoption of standards are 228774450.8 and 213863687.2
respectively; which shows less earning variability after the adoption of standards. Hence, the
adoption of standards has stabilized earnings.

29
The paper recommends comprehensive implementation of the standard to its totality by firms in
the country, and the regulatory authorities should monitor strict compliance. Further research in
the area of other sectors of the economy and to expand the sample size will assist in documenting
the impact of the adoption on the performance of the firms. It is evident that such may affect the
outcome of the research.

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