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Impact Of Change In Accounting Standards On Income Smoothing Of Deposit Money Banks In Nigeria

Authors: Simon Aondoakaa TYOAKOSU; Paul Aodona ANGAHAR
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This study seeks to empirically investigate whether there has been a significant change in the use of loan loss provisions to smooth income by Nigerian deposit money banks following Nigeria's change from Statement of Accounting Standards (SAS) to International Financial Reporting Standards (IFRS). In line with the objectives of this study, secondary data were obtained from financial statements of fourteen (14) deposit money banks in Nigeria covering 2006 to 2017 and extrapolated to 2019. Panel data was deployed with descriptive statistics, multiple regression techniques and paired sample t-test employed to establish the impact the change in accounting standards has on the use of loan loss provisions to smooth income. Results of the multiple regression analysis show that change in accounting standards introduced by IFRS adoption leads to reduction in the use of loan loss provisions to smooth income by deposit money banks in Nigeria, while the paired sample t-test results indicate there is no significant difference in income smoothing activities of deposit money banks in Nigeria using loan loss provisions under SAS and IFRS. Since income smoothing is positively related to loan loss provisions by deposit money banks in Nigeria under the IFRS regime, the study recommends that regulators should put a ceiling on the provision for loan losses rather than leaving it at the total discretion of managers who provide it to suit their selfish interests.