IFRS adoption: Issues, challenges and lessons for Nigeria and other adopters

Abstract

The adoption of International Financial Reporting Standards (IFRSs) in Europe and around the world represents perhaps the most important accounting regulatory change in recent years. The use of IFRSs as a universal financial reporting language is gaining momentum across the globe as more countries are adopting IFRS or converging their local standards with it. Nigeria has set a road map towards the adoption of IFRS from January, 2012. Although there are arguments that IFRS are irrelevant to developing countries but they are adopting it because IFRS is a product with "network effects". IFRS is perceived as a high quality accounting standard, compared to most local accounting standards, which can help to foster increased comparability of financial statements by investors. Globalization, increased border-listing, attraction of foreign investment and aids, and other institutional factors have been the motivating factors for IFRS adoption. Though IFRS promises a lot of benefits for financial reporting by adopters, there are many challenges and obstacles which must be overcome. Lessons from already adopters of IFRS reveal that for effective IFRS adoption, there must enabling institutional framework, accounting education and training, efficient capacity building programme to prepare the various stakeholders for the imminent transition and challenges.