CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
There has been quite a lot of criticisms in recent years about accountants and the financial report which they prepare. A lot of people have had to question the validity of the profit measuring procedures applied in arriving at the profit measuring procedures applied in arriving at the profit disclosed in the published accounts. Consequently, the profession has found it necessary to do a re-appraisal of the accepted procedures, which had found it necessary to do a re-appraisal of the accepted procedures, which had hitherto dominated accounting field in profit measurement. Quite a member of proposals have made an attempt in reforming the methods generally in use. This has resulted in the coming together of different countries with a view to working out modalities for the standardization of these profit measuring and reporting procedures. This gave birth to the International Accounting Standards Committee (IASC) and local bodies like the Nigerian Accounting Standard Board (NASB) for Nigeria. The International Accounting Standards (IAS) to be followed by all member countries of which Nigeria is one. Nigeria on the other hand produces additional Statements of Accounting Standards on Accounting Standards (SAS) in an attempt to make the International Standards meet local conditions. The Nigerian Accounting Standard Board (NASB), which was inaugurated in September 1992, was charged with the following responsibilities.
a) To formulate and publish in the public interest accounting standards to be observed in the preparation of financial statements and to promote the general acceptance and adoption of such standards by prepares and users of financial statements.
b) To promote and sponsor legislation when necessary in order to ensure that standards developed and published by the board received nation-wide acceptance adoption and compliance.
c) To review from time to time the standards developed by the board in the light of change in the social, economic and political environment. since 1982 till date, the board has issued statements of accounting standards and two dras at completion stages. The standards so far issued by the board are:- SAS
1 – Disclosure of Accounting Policies SAS
2 – Information to be disclosed in financial statements SAS
3 – Accounting for property, plant, and equipment SAS
4 – On stock SAS
5 – On construction contracts SAS
6 – On extra-ordinary items and prior year adjustment SAS
7 – On foreign currency conversion and transactions SAS
8 – On accounting for employees retirement benefits SAS
9 – On accounting for depreciation SAS
10 – Accounting by banks and non-bank financial institution (part 1). SAS
11 – On leases SAS
12 – On accounting for deferred taxes SAS
13 – On investment SAS
14 – On petroleum profit This work intends to analyze and examine usefulness of these standards in the financial statements with particular emphasis on Guinness Nig. Plc Enugu City.
Guinness (Nig) Plc, is one of the biggest breweries in Nigeria today. It is a quoted company in the Nigerian Stock Exchange Commission (SEC). Guinness (Nig) Plc is an associated of Guinness overseas ltd, with headquarters at Dublin in England. The journey of this company to Nigeria started in 1950 when the company was incorporated to import and distribute Guinness Stout from Dublin for sale in Nigeria. In 1962, the stout brewery in Ikeja Lagos, was commissioned. This station was the third of it kind in the world and the first outside the British Isles. A second brewery in Nigeria was commissioned in Benin and from 1982 other breweries stations was commissioned including in other states. The company share capital is made up of 60% ordinary share owned by Nigerians and 40% ordinary shares owned by Guinness overseas limited. The Enugu Department which happens to be over study interest has a sta strength of about 10000 workers including both skilled and unskilled workers. The accounts section of the brewery share of the total sta strength is about 200 workers. The accounting department which is charged with the responsibility of providing management with relevant financial information that enable her (management) make decisions, also maintains and keep proper books of accounts which are summaries of the daily financial activities of the company. Another major responsibility discovered within this accountant department is the preparation of the financial statements annually, which most be in compliance with the requirement of statements of Accounting Standards which external auditor must confirm and report on.
1.2 STATEMENT OF PROBLEMS
“Good accounting practice” means that the accounts must be prepared in compliance and in line with the Statements of Standards Accounting Practice (SSAP), International Accounting Standards (IAS), and Statement of Accounting Standard (SAS). Thus, the burden of this investigation is to find “Good Accounting Practice” is being adhered to in the preparation of the financial statement and its benefits. The researcher’s aims at achieving this by conducting special investigation on the requirements of the accounting standard and then relates it to the activities of preparing financial statement at Guinness (Nig) Plc.
1.3 PURPOSE OF THE STUDY
The objective of accounting and financial statements is to provide reliable information about the economic resources and obligation of the business enterprises. This information is important in order to evaluate the company’s strengths and weaknesses. Its information indicates the various resource based available to export opportunities and make future progress.
In summary therefore, the account gives information about the economic resources and obligation of a business enterprises, which is needed to form a judgment about the ability of the business to survive, grow, adapt, and prosper a mid harsh economic conditions. Another major purpose is that of providing information about the change in the net resources of the business organization, that is resources less obligations. If these objectives of accounting are to be achieve then the financial statements must be understood by its readers or users. This would only be possible if, they are prepared in accordance with the generally accepted accounting principles. Those principles are derived from authoritative guidelines and standards. Thus, the overall objective of research is to unveil the benefits or usefulness of the accounting standards in published financial statement oat Guinness (Nig) Plc. Other objectives or purposes of the study includes:
a. The effects of the standards on the Nigerian economy
b. To determine the extent of compliance of the financial statement in the accounting standards.
c. The benefits or uses of the standards in other areas like students and lecturers.
1.4 RESEARCH QUESTIONS The researcher formulated the following research questions to enable her carry out this research work:
1. What are the effects of accounting standards on the Nigeria economy?
2. To what extent has the Nigerian companies complied with accounting standards in the preparation of financial statement?
3. what are the benefits of the use of accounting standards in other areas of the economy?
4. How significant is accounting standards in the preparation of financial statement?