CHAPTER ONE

INTRODUCTION

Background of the Study

The impact of financial reporting on the corporate performance of a

business organization is becoming more apparent to user groups of a

financial statement.

Accounting is a not an exact science neither are business operations

without some subjective and judgmental errors when it comes to reporting

them. A financial reporting therefore is a document statement which

informs the various interest groups to a business on the operations and

performance of their business in a period under review its present state of

affairs as well as its anticipated future in accordance with the statutes. If a

financial report is to service its purpose it ought to be characterized by the

following.

a. Relevance

b. Understandability

c. Reliability

d. Completeness

e. Objectivity

f. Timeliness

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In the accounting process of an organization is to provide the

information required to prepare a financial report which shall have the

above characteristics then the transaction doing the period must be

recorded prompt by and accurately and interpreted in conformity with the

Generally Accepted Accounting Principles (GAAP) Statements of

Accounting Standard Board (NASB) International Accounting Standard

committee and the companies and Allied Matters Act cop LFN (CAMA)

Financial accounting reporting become necessary with the obvious

need for accountability of stewardship from the managers to whom

investors entrusted their financial resources. The Railway age in the UK.

Occurred between 1830 to 1870 and for the first time the world same the

emergence of multimillion corporations with large numbers of

shareholders. It was a period of disorder but it brought the basis for the

present day system of corporate financial report. Financial reporting is a

duty of stewardship assigned to the directors of a company by section

334 of the company and Allied Matters Act Cap L20 LFN equally the

mandatory responsibility of companies to keep accounting records

derives its strength from section 331 and 382 of the same act. These

sections explicitly defined the necessary content and manner in which

financial records should be kept.

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1.2 STATEMENT OF THE PROBLEM

The study “The impact of Financial Reporting on the corporate

performance of business organization” aims at investigating the financial

reports of selected companies in Enugu State with a view to determine the

following ;

a. The extent to which a standard financial report contributes to or

detracts from the growth of a business organization.

b. The extent to which the financial reports of corporate business

organization comply with statutory provisions.

c. The uniformity and conflict which exist in the financial reporting

regulations given the multiplicity of regulators.

Therefore bused on the above statements the researcher shall investigate

the financial accounting reporting standards and every regulation their bear

on the financial statement and to the extent the selected company (s) has

either complied with or disobeyed the relevant statutes.

1.3 OBJECTIVES OF THE STUDY

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The objectives of this study are to critically examine the financial

reports of the selected company and to probe into the fundamental for their

preparation as well as its presentation with a view to determining:

a. The adequacy of the basis and the fundamental that guides its

preparation.

b. The degree to which the financial report meets the needs of its

various users.

c. The extent to which the financial report conform to the established

standard.

d. The influence that financial report has on business performance.

e. Finally to present suggestions and recommendations based on my

findings.

RESEARCH QUESTIONS

In order to determine the impact of financial reporting on the

corporate performance of business organizations it is pertinent to test the

following question;

1. Does the information disclosed in the financial statements adequate

to support good decision making?

2. Does the disclosure requirement of the statutes affect corporate

performance positively or negatively?

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3. Do companies comply strictly with the regulation?

4. Does the financial report meet the needs of the various users?

This study will offer solutions to ones raised it is my believe that the

result of these finding will go a long why to helping researchers in this

area of study it will also enhance the understanding of the structure of

published reports and accounts by the users.

The various users groups of the published financial report have their

benefits from this study as follows:

1. The Potential Investors: These are groups who are interested in

committing their financial resources to the buying of the company’s

shares. These set of people will benefit from this study as the result

of this study still arm them with the necessary tools with which to

evaluate the financial report of a corporate organization as it affects

them.

2. The General Public: This group shall benefit from this report by the

knowledge that the business organization exists for them and not

against them as such has to live up to its full responsibilities.

3. The Regulators of Financial Accounting Report: This group

includes the Nigerian Accounting Standard Board (NASB) the

companies and Allied Matters Act 2004 Cap (20 LFN (CAMA) the

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Banking and Other Financial Institutions Act of 1991 (BOFIA)

prudential guidelines for licensed Banks. The Insurance Act 2003.

The study will help them to standardize and harmonize their

operations.

4. The Employee Group Including Existing: Potential and past

employees.

5. The Government Including Tax Authorities Department who

have Interest in the Financial Reports of Companies: The result of

this work shall be of immense assistance to each to these user

groups in the advancement of their interest.

1.4 RESEARCH HYPOTHESES

The following null and alternative hypothesis shall be tested in this

research works:

1. H0: The information provided in financial statements is not

adequate to support good decision making.

Hi: The information provided in financial statements is not

adequate to support good decision making.

2. H0: The disclosure requirements of statements do not affect

corporate performance positively.

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Hi: The disclosure requirements of statements do not affect

corporate performance positively.

3. H0: corporate organizations do not comply strictly to the statutory

regulations.

Hi: corporate organizations do not comply strictly to the statutory

regulations.

4. H0: Financial reports do not meet the needs of the various users of

financial information.

Hi: financial reports do not meet the needs of the various users of

financial information.

1.5 SIGNIFICANCE OF THE STUDY

This study is a very important one and most significant at this period

of economic situation which has witnessed the collapse of giant corporate

with impressive profit and loss accounts and balance sheet statement

because the financial report serves is a “prima facie” evidence on the state

of attains of such companies as well as its performance and could be relied

upon as a certificate because it had the auditors certification financial

reporting could be done with every ser business utmost good faith and

diligence.

1.6 SCOPE OF THE STUDY

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This study could have covered the impact of financial accounting

reporting on corporate performance of all the sectors of the Nigerian

economy but due to the challenges of such a task especially the financial

resources with which to execute it it is limited to braving industry. The

study used the Nigerian Breweries plc Enugu.

1.7 LIMITATIONS OF THE STUDY

The limitations encountered by the researcher of this work are given

as follows:

a. The confidential nature of financial accounting information in the

business organization posed as a problem to this business

organization posed as a problem to this study.

b. The researcher was unable to reach all the members of the sample

as a result of their frequent travels and busy schedule.

c. The sample used in the research though representative but it is

relatively small compared to the population as a result of lack of

financial with which to carry out the research on a greater sample.

1.8 DEFINITION OF TERMS

Auditor: a person who is qualified to examine the accounts of an

organization to see that they are in order.

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Balance Sheet: a business as at a specified date.

Bank: a financial institution whose responsibilities among others is to keep

deposits for their client and customers.

Government: an institution of the state whose responsibility is to maintain

law and order in the society.

Prima facie: sufficient to establish something legally until disprove later.

Researcher: an enquiring basically concerned with search knowledge.

REFERENCES

Alexander D. and Britton A (1996); Financial Reporting (5th edition).

London. Olakanmozco (2007); The Companies and Allied Matters

Act Cap. (20 LFN 2204 (2nd edition) Law Lords Abuja.