Association between Firm Size Firm Effects and the Extent of Compliance with Accounting Standards Disclosures by Government Business Enterprises in Nigeria

Abstract

All over the world Accounting Standards are issued in order to provide the benchmark for preparation of financial statements. However, recent findings show that accounting is used to misrepresent earnings and assets in financial reports. As guiding rules, accounting standards are expected to influence disclosures in financial statements preparation. However, recent failures of businesses resulting from inadequate compliance with accounting standards disclosure requirements raises fundamental questions about the ability of accounting standards to enforce compliance with its principles. Similarly, the Accountant General for the Federation’s reports on audited financial statements of commercialized Federal Government Enterprises (CFGE) in Nigeria over the decades have shown that financial statements have not fully comply with accounting standards requirements. Studies have also suggested in the past that disclosures are influenced by firm characteristics. However, the findings of prior studies are divergent, varying from study to study, industry to industry and country to country. To verify the reports of the AGF and prior studies’ findings, this study determined the extent of compliance with accounting standards disclosure requirements by CFGE and also investigated the influence of firm size and firm effects on disclosure practices of 18 filtered government enterprises in Nigeria. The theoretical framework of this study linking disclosure practices to corporate attributes of commercialized enterprises was based on four theories- agency, stewardship, stakeholders, and resource dependence theories. The study used contents analysis methods for data gathering and employed Descriptive Statistics and Multiple Regression Analysis for data analysis. Based on the analysis conducted, the findings showed that firm size has significant influence on extent of compliance with accounting standards disclosure requirements. In addition the findings showed that majority of CFGE’s nature influences compliance with accounting standards disclosures. The findings also showed thatonly two enterprises that had disclosure indices above 91% (96% and 95%), the remaining 16 enterprises’ disclosure indices were low, compared with the cross-country disclosure index benchmark of 91% for emerging economies like Nigeria. The findings indicated that an increase in fixed assets would increase the extent of compliance with accounting standards as it would improve the financial capability to employ and/or engage qualified accountants in the finance and accounts management positions of the enterprises and big audit firms to audit enterprises’ financial statements. This has the potential of increasing the level of compliance with accounting standards in these enterprises. The study suggested four possible ways by which investment in assets of government business enterprises would be improved; these include: outright privatization, government/private partnership, reforms in the share guarantee status of the commercialized enterprises to allow private investors to come in and government should fulfill the performance agreements made to the Governing Board of these enterprises.