Role of IPSAS Adoption in Improving the Decision Usefulness of Financial Reports: Evidence from Northern Nigerian State Governments

Abstract

This study examined the role of International Public Sector Accounting Standards (IPSAS) compliance in improving the decision-usefulness of financial reports in Northern Nigerian state governments, with particular emphasis on relevance as a qualitative characteristic of reporting quality. Using secondary data from the audited financial statements of 19 state governments covering 2015– 2022, the study assessed compliance with 176 disclosure requirements across eight IPSAS standards. A compliance index was developed and analysed alongside a five-point measure of reporting relevance. Descriptive results revealed low compliance, with an overall average of 38% and wide variations across standards, moderate compliance with IPSAS 1, 2, and 3 but very low compliance with IPSAS 23, 24, 33, and 39. Regression analysis indicated that compliance with IPSAS significantly enhances reporting relevance, particularly through IPSAS 1, 3, and 22, while weak or inconsistent implementation of IPSAS 2, 24, and 33 limited their effectiveness. The fixed effects model provided the best fit, underscoring the importance of state-specific factors in shaping reporting outcomes. The findings align with international evidence of uneven IPSAS implementation in developing economies and highlight the need for stronger enforcement, institutional reforms, and capacity building to improve compliance and enhance decision-useful financial reporting at the subnational level.