THE DEVELOPMENT OF ACCOUNTING PRINCIPLES AND STANDARDS (AN EMPIRICAL STUDY)

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ABSTRACT

          The objective of this study is to access based on empirical research the exceptional qualities or otherwise of the present accounting principles and standards.

Information was drawn from both primary and secondary sources. The primary sources were held with members of institute of chartered accountants of Nigeria (ICAN) on the subject matters. During the time, question on the general field of accounting principles and development were asked. The rest of the information came from library sources.  The information collected was analysis using simple tabular diagrams, percentages, ratio and statistical tools chi-square. The result obtained from this study is that the present way of evolving accounting principles and standard from the beginning which dates back to 600BC has not been very helpful. The study also revealed the economic life of business differ significantly so that the purpose or aims of financial reports are not the same everywhere. All these have resulted to display in the financial report between accounts.

Although, it  is evident that a quest deal of success has been recorded by the accountancy, bodies worldwide, in standardizing existing standards. This project recommends that a standard based on contemporary problem and fashioned for the immediate or particular business environment be evolved. It is hoped that when the points mentioned above are fully implemented, the accountancy profession, especially in Nigeria which is currently being threatened by existing laws in the country, can effectively render those necessary committee it owes to the public it services. By way of reward for the this services, the future existences of the profession would be guaranteed as it would remain ever strong and reliable.`2

 

LIST OF TABLES

Table 1:       Statement of standard Accounting practice (SSAP)

Table 2        Reconciliation

Table 3        Questionnaire administrative and received

Table 4        The disclosure of Accounting Policies and information and the producers and users in the understanding and interpretation of financial statement and the making of economic decision (SAS) 1 and 2

Table 5        Does the use of several method for valuing and reporting stock, give rise to wide  differences in  total result of the operations of enterprises in the same line of business (SAS4)

Table 6        Will the accounting for employee retirement benefits help in determination of the amount due to employees before or after the date of implementation of plans (SAS8)

Table 7        Will the accounting for depreciation provide a guide for uniform and acceptable method of determining and reporting depreciation on items? (SAD9)

Table 8        Is there need for  review of the accounting principles and standards to reflect contemporary problem?

Table 9        The environment of the practice of accounting profession as presented by the companies and Allied matters decreed is a result of tact of trust in the professional accounting in Nigeria

Table 10      In your own opinion were the thirteen standard launched by the Nigeria Accounting standard board (NASB) actually developed by were they mere modification of UK SSAP”

Table 11      Is there need for a review of the accounting principles and standards to reflect contemporary problems?

Table 12      The encroachment of the practice of accounting profession as presented by the companies and allied matter decree is as a result of lack of trust in the professional competence of professional accountants in Nigeria.

Table 13.     Chi-Square table

Table14.      Chi-Square table.

 

TABLE OF CONTENTS

CHAPTER ONE

Introduction                                                                                           1

1.1     overview of study                                                                        1

• Statement of problem 5
• Objective of study 6
• Hypothesis of the research 7
• Significance of the study 8
• Limitation of the study 9
• Definition of terms 9

Reference                                                                                     12

CHAPTER TWO

Review of related literature                                                                    13

2.1     Historical development of accounting                                          13

2.1.1  The early financial accounting                                                     13

2.1.2  The venture accounting                                                               15

2.1.3  The joint stock company                                                              16

• Development of accounting principles and standards 18
• Recent revisions to accounting standards 23
• Foreign currency transaction and conversion 25
• Accounting for depreciation 26
• Accounting for lease and hire purchase 28

References                                                                                   31

CHAPTER THREE

Research methodology                                                                          33

3.1     sources of data                                                                             33

3.1.1  Primary data                                                                                          33

• Secondary data 33

• Population and sample size 34
• Methodology used 35

CHAPTER FOUR

Presentation and Analysis of Data                                                         38

• presentation and analysis of an empirical research into

the accounting principle and standards                                        38

• Testing of hypothesis 46

CHAPTER FIVE

Summary of Finding Recommendation and Conclusion                        62

5.1     Recommendation                                                                         64

5.2     Conclusion                                                                                  67

Bibliography                                                                                68

Questionnaire                                                                              71

CHAPTER ONE

 

1.1     OVERVIEW OF STUDY

The hall mark of a profession is its commitment to the public service.  The commitment can be classified into three.  Firstly, there must be satisfaction of the society being served, secondly there must be professional pride invite craft and thirdly the profession should be accorded recognition be fond its national boarders.

If we go down into memory, we discover that the need for better accounting principles and standards is a world wide phenomenon, for instance, Noel Hyndman and Robert kink (1989:20) said that one of the main reasons for the dearth of new standards and revisions of same is the fact that the accounting standard committee (ASC) like other standard setting bodies now begin to investigate accounting topics which are extremely controversial.  Invariably, most of the new standards involve significant adjustments to both the profit and loss account and the valuation of assets and liabilities in the balance sheet.

Again, Noel Hyndman and Robert kink (1989:42-44) on then part saw from every practical objective level, most countries have disconvered lack of clear statement of the aims and purpose of financial reporting as the major, short coming in the standard setting processes.  According to Hyndman and kink, and citing germany as an example, “financial statement are considered as one of the most important vehicles for communicating with people who have financial interest in business enterprises”.  The art of accounting in this circumstances unlike the (former) is to provide a reliable and relevant information to the interested parties.

Explaining his own reaction on the global effect of clear statement of the aims and purposes called, “in the united states for example, the stock market crashes of 1929 and 1969 which was blamed on financial report by companies first triggered the estblishment of  accounting standard in that country”. He went further to say that in the U.K, like Nigeria the establishment of accounting standard committee (ASC) by the six professional bodies were ignited by lack of uniform Nigerian situation was made worse by the Nigerian enterprises promotions decree which attempted to transfer ownership of companies to Nigeria”.  Foreighers exploited the lack of uniform accounting procedure in valuing their equity in corporations affected by the decree.  Practicing accountant is faced to go down memory lane once more, he may admit that the problem emanated from their evolvement of those principles and standards that date back to 600 B.C., when accounting as a practice came into being.  Ordinarily, he may resolve that all it takes to improve on the principles is a fough body of accounting standards.  But could these forestall the disasters in the accounting world most especially in our country?

Today, the disaster is becoming more real than apparent in Nigeria with the introduction of the secondary foreign exchange market (SFEM), the recent open market operation (OMD) and foreign exchange market (FEM).  According to Okpechi 91990:5) this system has brought in its wake a lot of pressures on management of companies to show profits in the fact of rapidly dwindling revenues.  Accounts are most likely going to be massaged and manipulated to show favourable result.  Once more, it is in this regard that accounting standards  of measurement and reporting and the need for more to be more responsive to developed principles assume greater importance.

If members of the profession feel that the present principles and standards have not altogether done much good, shall helplessly ching to them or find something that would be benefical to helping to achieve consistency between standard.  After all December 20^th century dictionary (1985:1022 AND 1261) pointed out the three major qualities of all principles and standard, it defined principles as “consistent regulation of behaviour accord go moral law” and standards as accepted authorities statement of adequacy required.  According to Oxford English Dictionary second edition volume xii (1991:499) principles is defined as a “general law or rule adopted or professed as a guide to action, a settled ground or basis of conduct or action, especially one consciously recognized and followed and standards as a definite level of excellence, attainment, wealth or the lay or a definite degree of any quality, viewed as a presaribed object of ondeavour or as a measure if what is adequate for some purpose.  Form the foregoing, one may deduce that principles or standard is consistency applied if it provides adequate treatment for items in question.  The adequacy assume its acceptability and the circle contnues here lies our problem.  The primary aim of this project, therefore is to find something we could expect would lead to a cutting back of alternative treatments in a longer term.  In the short come closer to which could be regarded as our yearning principles or philosophy.  Put simple a better account standard evolved to solve our immediate problems.  This standard is also expected to fit into the economic like of particular place in question

 

1.2               STATEMENT OF PROBLEM

          Okpechi statement presents one of the problems of this thesis.  I have been tempted many times, to dispel certain newspaper misconception about why the Nigerian accounting standard Board was established and how.  The standard developed so far are carbon copies of those produced elsewhere”…

(Okpechi 1990:2)

so, the first of the needs of this project is to see how accounting principles development based on our local problems instead of reinventing