The Nigerian Accountant 2012 - The Institute of Chartered ...

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IFRS Adoption of Foreign Direct Investments can, in part, be attributed to the limited financial reporting and disclosures made by reporting entities to Nigeria. This is so because some of the entities in Nigeria. This is because some of the entities do not provide investors with sufficient economic information that will enable them to understand that risk profiles of such entities and permit informed judgments and decisions. The Nigerian market is increasingly becoming a sophisticated market. Customers are becoming more discerning and governance framework is gradually being improved through various codes of corporate governance which have been introduced. The competitive environment which environment which now exists as a result of market-oriented economic policy reforms enacted by the government of Nigeria further creates opportunities for potential investors. Today, business has become more global and thus has lost a significant part of its national identity. Nigeria indeed is a part of this globalisation. In recent times a number of companies have raised capital from international stock markets; others have established significant presence in other jurisdictions. Also, a good number of Nigerian entities hold the securities issuers. Therefore for a better understanding and appreciation of the risks and consequently making decisions about the flow of economic capital, it makes sense to have a global finance reporting benchmarks. International and national investors will better be placed to make rational economic decisions when financial information is comparable between countries competing for foreign direct investments. The global adoption of a single set of financial reporting standard, no doubt, will enhance such comparability and create an enabling environment for all investors to be able to effectively compare investment opportunities across the global market. The globalisation of capital markets is an irreversible process, and there are many potential benefits to be gained from mutually recognised and respect international accounting standards. Common standards cut across borders by reducing the need for supplementary information. They make information more acceptable, thereby enhancing evaluation and analysis by users of financial statement. Users become more confident with the information they are provided with, and presumably this reduced uncertainty promote an efficient allocation of resources and reduces capital cost. There are however some inherent problems with aligning with international standards. This is due to the competing perspective of different nations, along with the universal tendency to resists change. Too cooperation comes only from compromise and sometimes to detriment of quality. On the regulatory side, allowing the use of different standards by foreign and domestic companies not only detracts from comparability but may also undermine domestic financial reporting. The ultimate effect of various proposals in Nigeria to ease requirements for foreign issuers could significantly erode comparability. It will be in the interest of the Nigerian economy for listed companies to adopt globally accept, high-quality accounting standards with International Financial Reporting Standards (IFRS) over the earliest possible transition period, given the increasing globalisation of capital markets. A significant number of small indigenous accounting firms are now seeking international networks because businesses are engaging in more international transactions, cross-border listing is now commonplace and accounting firms are beginning to follow their growing corporate clients into the countries in order for these firms to continue to provide services to these clients wherever they are. It should be noted also that governments are been persuaded to engage in wide raging reviews that recognise the importance of reassuring the markets and the public at large that corporate reporting and governance frameworks are sufficiently robust. Introduction to IFRS Historically, multinational and global companies were required to prepare separate financial statements for each country in which they did business, in accordance with each country’s generally accepted accounting principles. In 1973, the International Accounting Standards Committee (IASC) was formed in response to the growing need to develop a set of common financial standards to address the global nature of corporate financing. In 2000, the IASC received support from the International Organisation of Securities Commissioners (IOSCO), the primary forum for international cooperation among securities regulator. The IOSCO recommended its members (currently 181 organisations including the U.S. Securities & Exchange Commission and the Committee of European Securities Regulators) permit multinational companies to use IASC standards along with reconciliation to national GAAP. In 2001, the IASC reorganised as the International Accounting Standards Board to incorporate representatives from national standard-setting organisations. The term IFRS has both a narrow and broad definition. Narrowly, it refers to the specific set of numbered publications issued by the IASB. Broadly it refers to all publications approved by the IASB, including standards and interpretations issued by its predecessor, the IASC. Unlike U.S. GAAP, there is no hierarchy to IFRS guidance. All standards and interpretations have equal levels of authoritativeness. (Fay, R.G. et al, 2008). Per definition the standards comprise: • International Financial Reporting Standards (IFRS) — standards issued after 2001 • International Accounting Standards (IAS) — standards issued before 2001 • Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC) — issued after 2001 • Standing Interpretations Committee (SIC) — issued before 2001 • Conceptual Framework for the Preparation and Presentation of Financial Statements (2010). The list contains all standards and interpretations regardless if they have been suspended. By comparison, Nigerian GAAP is made up of the following: • The Companies and Allied Matters Act (CAMA) LFN 2004 • Statements of Accounting Standards (SAS) issued by the Nigerian Accounting Standards Board (NASB) • Other local legislation and industry specific guidelines such as BOFIA, Prudential Guidelines, Insurance Act and SEC Rules • International best practice (optional). THE NIGERIAN ACCOUNTANT 60 April/June, 2012
IFRS Adoption List of International Financial Reporting Standards and International Accounting Standards The following IFRS statements are currently issued: • IFRS 1 First time Adoption of International Financial Reporting Standards IFRS 2 Share-based Payment IFRS 3 Business Combinations IFRS 4 Insurance Contracts • IFRS 5 Non-current Assets Held for Sale and Discontinued Operations • IFRS 6 Exploration for and Evaluation of Mineral Resources IFRS 7 Financial Instruments: Disclosures IFRS 8 Operating Segments IFRS 9 Financial Instruments IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurement IAS 1: Presentation of Financial Statements. IAS 2: Inventories • • • • IAS 3: Consolidated Financial Statements originally issued 1976, effective 1 Jan 1977. Superseded in 1989 by IAS 27 and IAS 28 IAS 4: Depreciation Accounting Withdrawn in 1999, replaced by IAS 16, 22, and 38, all of which were issued or revised in 1998 IAS 5: Information to be Disclosed in Financial Statements originally issued October 1976, effective 1 January 1997. Superseded by IAS 1 in 1997 IAS 6: Accounting Responses to Changing Prices. Superseded by IAS 15, which was withdrawn December 2003 IAS 7: Cash Flow Statements • Estimates and Errors • IAS 8: Accounting Policies, Changes in Accounting IAS 9: Accounting for Research and Development Activities – Superseded by IAS 38 effective 1.7.99 IAS 10: Events after the Balance Sheet Date IAS 11: Construction Contracts IAS 12: Income Taxes • Liabilities – Superseded by IAS 1. • on 1 January 2008) • Prices – Withdrawn December 2003 IAS 16: Property, Plant and Equipment IAS 17: Leases IAS 18: Revenue IAS 19: Employee Benefits • • Rates • IAS 13: Presentation of Current Assets and Current IAS 14: Segment Reporting (superseded by IFRS 8 IAS 15: Information Reflecting the Effects of Changing IAS 20: Accounting for Government Grants and Disclosure of Government Assistance IAS 21: The Effects of Changes in Foreign Exchange IAS 22: Business Combinations – Superseded by IFRS 3 effective 31 March 2004 IAS 23: Borrowing Costs • • Benefit Plans • Economies • IAS 24: Related Party Disclosures IAS 25: Accounting for Investments – Superseded by IAS 39 and IAS 40 effective 2001 IAS 26: Accounting and Reporting by Retirement IAS 27: Consolidated Financial Statements IAS 28: Investments in Associates IAS 29: Financial Reporting in Hyperinflationary IAS 30: Disclosures in the Financial Statements of Banks and Similar Financial Institutions – Superseded by IFRS 7 effective 2007 IAS 31: Interests in Joint Ventures • IAS 32: Financial Instruments: Presentation (Financial instruments disclosures are in IFRS 7 Financial Instruments: Disclosures, and no longer in IAS 32) IAS 33: Earnings Per Share • • Contingent Assets IAS 38: Intangible Assets • Measurement • IAS 41: Agriculture. IAS 34: Interim Financial Reporting IAS 35: Discontinuing Operations – Superseded by IFRS 5 effective 2005 IAS 36: Impairment of Assets IAS 37: Provisions, Contingent Liabilities and IAS 39: Financial Instruments: Recognition and IAS 40: Investment Property There are several approaches to embracing IFRS in a jurisdiction. These include situation where: IFRS are, by, domestic accounting principles; IFRS are integrated into domestic accounting standards, * using the exact words in the IFRS, but with the possibility of local Jurisdiction restricting accounting alternatives provided in the IFRS and the provision of additional commentary to assist implementation; IFRS are incorporated into local legislation without * amendments after a formal review; IFRS are the benchmark towards which domestic * accounting are moving, through a gradual process of convergence or harmonisation. IFRS are considered “principle based” set of standards in that they establish broad rules as well as dictate specific treatments. Overview of the Key Drivers of IFRSs The key drivers of the Uniform Global Accounting Language, according to Oyedele (2011), are: (i) Increasing demand for public accountability and transparency by all stakeholders. (ii) Facilitate Industry perception of improved transparency and comparability for investors and rating agencies. (iii) More efficient access to capital for global corporations (iv) Need to attract international investors and to enable easy monitoring of overseas investments. (v) Reduced cost of financial reporting for global THE NIGERIAN ACCOUNTANT 61 April/June, 2012
Page 3 and 4: Contents The Nigerian ACCOUNTANT (I
Page 5 and 6: Health PARKINSON DISEASE What is Pa
Page 7 and 8: Health monotone voice • Urinary f
Page 9 and 10: Financial Reporting FINANCING LOCAL
Page 11 and 12: Financial Reporting revenue for the
Page 13 and 14: Financial Reporting Governments. Th
Page 15 and 16: News I Respect Chartered Accountant
Page 17 and 18: News the President and dancing sess
Page 19 and 20: Events The 2012 Annual Dinner and A
Page 21 and 22: News sufficient flexibility for ent
Page 23 and 24: Conference to champion the course o
Page 25 and 26: Business importing rice alone from
Page 27 and 28: Business for smart entrepreneurs to
Page 29 and 30: Business their opportunity. An Entr
Page 31: IFRS Adoption The Challenges and Pr
Page 35 and 36: IFRS Adoption document management d
Page 37 and 38: Cover Article Rebuilding Trust In N
Page 39 and 40: Cover Article pricing. Even the tra
Page 41 and 42: Cover Article must demand personal
Page 43 and 44: Cover Article outlined above, it is
Page 45 and 46: Cover Article customers, source and
Page 47 and 48: Cover Article Appendix 1: Failed Ba
Page 49 and 50: Conference Utilising Approved Taxes
Page 51 and 52: Conference to problems of revenue g
Page 53 and 54: Seminar Retirement & Implications o
Page 55 and 56: Features Financial Imbalance and Fi
Page 57 and 58: Features former President Olusegun
Page 59: Features outcomes with greater cost
Page 68: Designed by BEP Graphix, Lagos. Pri

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