Financial Reporting and Organizational Liquidity in Nigeria: the Accounting Bases Perspective.

Abstract

The purpose of this paper is to identify the influence of financial reporting from the perspective of accrual and cash bases on organisational liquidity; with cashflow adopted as a measure of liquidity. Agricultural companies quoted on the Nigerian Stock Exchange were studied. Data are collected through questionnaire. Analyses were performed using descriptive statistics and Pearson’s product moment coefficient of correlation. Findings indicate that accrual basis sub-domain of financial reporting has a statistically significant weak negative relationship with cashflow while cash basis has a statistically significant moderate positive association with cashflow. Similarly, results of the descriptive statistics indicate that the adoption of accrual basis improves cashflow by 48.5% while that of cash basis improves cashflow by 85.0%. Based on empirical findings, it was concluded that cash basis of financial reporting provides a better assessment of liquidity in the context of cashflow than accrual basis. Consequently, financial reporting should emphasis liquidity, particularly, through the incorporation of cashflow statements; this will enhance identification of organisation’s ability to meet obligations as they become due.

Keywords:Financial reporting, liquidity, agriculture, Nigerian Stock Exchange, Nigeria.