|Title: EFFECT OF IAS23 COMPLIANCE ON SOLVENCY OF DEPOSIT MONEY BANKS IN NIGERIA|
Dr. Siyanbola, tunji, ayodele, oluwasegun, audu, moday atadogah and alabi, tunde muyideen
The general knowledge from the understanding of IAS 23 is that borrowing costs incurred in financing qualifying assets be capitalized with the accompanying capitalization rate duly disclosed in the financial statement, but the implication of such treatment on entity’s solvency is seldomly discussed. This study presented the relationship between IAS 23 compliance and the solvency performance of deposit money banks in Nigeria. Borrowing costs capitalized and IAS 23 disclosure were used to predict the observed dependent variable (Debt-to-assets ratio). Seventy-five financial statements from fifteen sampled banks over a period of five years (2016-2021) were analyzed using Statistical Product and Service Solutions (SPSS) version 23. The findings revealed significant inverse relationship between Capitalized borrowing costs and the value of debt-to-assets ratio meaning that as the capitalization of banks’ qualifying borrowing costs increases, the debt-to-assets ratios decreases.IAS 23 disclosure has a positive significant relationship with Debt-to-assets ratio. This study rejected the null hypothesis and concluded that the relationship between IAS 23 compliance and the solvency performance of commercial banks in Nigeria is statistically significant. While IAS 23 has succeeded in improving comparability by eliminating some of the divergences with the US GAAP, this study recommended reduction in judgmental interpretations through further amendments to specifically define some terms such as ‘substantial period of time’, cessation of capitalization of borrowing costs when activities necessary to prepare the qualifying asset have been ‘substantially’ completed.
|Keywords: Borrowing Costs, IAS, IFRS, Qualifying Assets, Solvency.|