European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.6, No.8, 2014 29 Effects of IFRS Adoption on Inventory Valuation and Financial Reporting In Nigeria Onyekwelu, Uche Lucy Onyekwelu, Uche Lucy, MBA, ACA, ICAN IFRS CERT. Department of Accountancy, Enugu State University of Science and Technology. Enugu,Nigeria MOBILE: 0803-3366045; E-mail: anneshalome@yahoo.com Uche Ugwuanyi Boniface Ph.D Department of Accountancy, Enugu State University of Science and Technology. Enugu,Nigeria E-mail : uchebrowntak@yahoo.com Abstract: The IFRS has streamlined the basis for valuing inventory against that which was hitherto posited by the Statement of Accounting Standards (SAS) or the US GAAP. These methods have far reaching implications for the value of inventory firms would report in their financial statements. This paper has examined those methods adopted by the International Financial Reporting Standards (IFRS) and there would be implication on financial reporting in Nigeria. The study was conceptual and empirical with most data sourced from the relevant text book and the internet. A survey was also carried out to know the level of awareness of this adoption and level of compliance. The study revealed that though some companies has adopted the use of FIFO method but a good number are still using the LIFO method which was proscribed by IFRS. The study recommends that firms should adopt the use of FIFO and Weighted Average Methods as prescribed by IASB and the others permitted by IFRS. This will make their financials comparable under the IFRS while firms should embark on intensive training of their accounting staff to get them to becoming IFRS compliant. Key words: Inventory, Valuation, Financial Reporting, IASB, IFRS 1.0 Introduction: 1.1 Background of the study: Stock as it was referred to in GAAP which Nigeria had used as a basis for its financial reporting before the adoption of IFRS by the FEC of Nigeria in 2010 can be said to be the life wire of any business. Infact to run out of stock or inventory is a first sign of illiquidity or distress of any organisation. To this effect, the very recent adoption of IFRS in financial reporting has ushered in a number of modifications or changes in the basis in which inventory is valued for the purposes of stock valuation. The modification has even gone to the extent of changing the name from 'stocks' to ' inventory'. Other modification outright ban of some methods hitherto used under the GAAP while some were modified to accommodate the views of the IASB which is the body issuing IFRS. The US GAAP in which Nigeria subscribed to initially has some of the basis for valuation of inventory to include FIFO- First in First Out; LIFO- Last In First Out, Simple Average Price; Weighted Average; Periodic Simple Average; Periodic Weighted Average; Base Stock ;Standard Price and so on. However, the IASB through IAS 2 streamlined the method of inventory valuation to basically include FIFO- First in First Out; Weighted Average Method; Net realisable value. Other valuation method permitted by IFRS stated in IAS 2 include Retail method; Gross Profit Method; Fair value; standard cost method; Net Realizable Value. The rest of this paper will x-ray these methods and their perceived impact on financial reporting in Nigeria. Statement of the Problem Over the years, financial reporting and indeed inventory has been valued in Nigeria based on the GAAP and precisely the Statement of Accounting Standard(SAS 4). However, the pronouncement of the Federal Executive Council of Nigeria in which a Road Map for the adoption of IFRS has presumed that most corporate entities have keyed into IFRS. This presumed that all the financial reports variables including the inventory values will be IFRS compliant and that is the essence of this paper. Objectives of the study The broad objective of this study is to examine the effect of IFRS adoption on inventory valuation and financial reporting in Nigeria. Other specific objectives of this report are to: 1. Determine the various inventory valuation methods as prescribed by the IASB; 2. Determine the effect of the IFRS inventory valuation methods on inventory values reported; 3. Identify the disclosure requirement of IAS 2 on the various methods; 4. Identify some of the benefits of the new development to financial reporting in Nigeria.