Effect of International Financial Reporting Standards Adoption on Management Accounting System of Deposit Money Banks in Nigeria

Abstract

In an ever-evolving business environment, organisational structures and functions have been observed to be influenced by institutional pronouncements such as the International Financial Reporting Standards (IFRSs). These standards came to existence as a result of the Norwalk Agreement of 2002 between the Financial Accounting Standards Board (FASB), based in the United States of America and the International Accounting Standards Board (IASB) based in the United Kingdom. The aim of these standards is to promote transparency and enhance quality of financial reporting. Drawing from the position of institutional theory, pronouncements of institutions such as the IASB do have effect on organisational structures. This is because organisations will often go all the way to abide by such pronouncements in order to enjoy the approval of such institutions as well as the support of other stakeholders. Though these standards were initially prescribed to enhance quality of information available to external users, studies have shown that a degree of convergence now exists between financial and management accounting information. This provides a premise for ascertaining whether or not existing management accounting systems need to change to be able to produce information compatible with information requirements under the adoption of IFRS. Consequently, the aim of this study is to ascertain the effect of adopting international financial reporting standards (IFRSs) on management accounting systems by deposit money banks (DMBs) in Nigeria. This study relied extensively on primary data, which were gathered from questionnaires administered on persons designated as finance officers in the sampled DMBs. A satisfactory response rate of 66.7% was recorded. Both descriptive and inferential statistical tools were employed to analyse data gathered. Results of descriptive analysis suggest that management accounting system prior to adoption of IFRS was different from management accounting system after the adoption of IFRS. At a 95% CI, the result of regression analysis shows that the adoption of IFRS did significantly affect management accounting system(MAS) (β=2.18, F= 0.27, p= 0.000). By inference there will be cost implications for switching from traditional MAS to revolutionary MA.