The Nation Newspaper

Tag: FRC

  • FRC advises banks on infrastructure

    The Chief Executive Officer, Financial Reporting Council (FRC), Mr Jim Obazee, has advised banks to provide enough infrastructure for growth.

    He said problems, such as poor accounting ideas and planning would reduce, when banks put in place necessary infrastructure.

    Speaking during a stakeholders forum in Lagos, Obazee said technology is vital to the operations of financial institutions globally, adding that it has helped in minimising accounting errors.

    He said poor infrastructure was one of the problems that caused crisis in the industry in 2009, adding that many banks gave out loans to their directors without putting in place measures to ascertain their credit history.

    He said: “We do not collect adequate information on burrowers. That is why banks have problems when customers defaulted. Once there is good infrastructure, banks would be able to monitor their burrowers, know their companies, their capacity to pay back among other information. Based on these, banks would be able to know the credit rating of their customers. The moment they know that the credit rating of some companies is poor, they would not give loans to such companies.”

    The banks would provide faultless accounting policies, when they have the necessary facilities in place.

    Obazee said fighting inflation should not be the job of the Central Bank of Nigeria (CBN) alone, advising stakeholders to make data in their sectors available as at when due.

     

  • Furore over banks’ donations to FRC

    Investors, banks’ executives, financial services operators and stakeholders have deplored huge donations by banks to the IFRS Academy, an initiative of the Financial Reporting Council of Nigeria (FRC).

    Shareholders have criticised the donations, which were highlighted in the yearly reports of the banks, as official arm-twisting, wondering why the government agency could not fund its learning initiative.

    Annual reports of several quoted companies released so far showed a wide gap between banks’huge donations to the IFRS Academy and almost none from non-financial services’companies.

    Bank executives were silent when they were queried on the issue by miffed shareholders; some executives merely offered off-the-camera excuses of “you know they are our regulator, it’s in our best interest to comply.”

    Stakeholders, who spoke in confidence to The Nation, said such donations could compromise the integrity and independence of the FRC.

    A leader of financial services trade group said FRC needs to tread carefully in order not to undermine the integrity of the financial regulatory system, especially given its onerous duty as the accounting standards setter and implementer of the International Financial Reporting Standards (IFRS).

    They expressed dismay that as the government agency in charge of ensuring companies comply with accounting rules and practices, such donations could compromise FRC’s integrity.

    The academy is a unit of the FRC and it’s aimed at training regulators and operators in IFRS.

    It would be recalled that the Federal Government had directed that companies should convert to IFRS with effect from January 1, last year.

    Chief Executive Officer of FRC, Mr Jim Obazee, had explained that the IFRS Academy would help to update accounting skills, lamenting the deplorable state of accounting training in higher institutions in the country.

    He had noted that most of these accounting students go through school without any knowledge of IFRS, making them almost unemployable.

     

  • IFRS: Non-compliant firms’ accounts may be rejected

    The financial reports of quoted manufacturing companies whose accounts for the year ending December 31, 2012 do not contain basic provisions of the International Financial Reporting Standard rick being rejected, the Financial Reporting Council (FRC) has said.

    FRCis charged with enjoying accounting rules, and ensuring that other regulating bodies comply with their own regulations.

    Speaking to The Nation in Lagos, FRC’s technical resource person Uwadiae Oduware said impairment test on assets, consolidation of entities bought, consolidation of investments where investor has less than 50 per cent control, loans obtained at below market rate, among other, are expected to be included in the financial statements.

    Accounting reports that do not contain these stand the risk of being rejected, he added.

    Oduware said firms are deemed not to have complied with IFRS when their financial reports lack these basic elements.

    He said: “The deadline for the adoption of IFRS for manufacturing companies was December 31, 2012. Though there is no punishment for erring firms, FRC may reject financial statements that do not reflect basic provision of IFRS to serve as deterrent to others. Impairment test is not optional for any entity reporting on the basis of IFRS.”

    He said firms are not only required to carry out impairment test or review of their assets at the end of every financial year, but they must include it in their financial reports.

    He said Impairment of Assets known as IAS 36 is well spelt out in IFRS guidelines, stressing that firms that failed to carry out the test have violated IFRS rules.

    Mr Oduware said: “When a company buys assets, it must estimate the usefulness of such assets vis-à-vis its lifespan. For instance, if the assets are expected to last five years, and could not last that period due to certain problems or changes, the assets must be reviewed to know the extent of impairment or depreciation.

    “If a firm has a property close to the lagoon, and concluded that the property will last for 25 years. But due to flood, among other natural disasters, the economic life of the property has reduced. Based on this, the owner of the property is expected to carry out an impairment test on the asset to know the level of depreciation. This must be reflected in the financial statement of the company, as part of requirements for complying with IFRS.”

    He said many entities are looking for ways of avoiding this requirement because of its cost implications, stressing that the development will have grave consequence on the company.

    Oduware also said firms that failed to consolidate their entities before preparing their financial reports have breached IFRS rules.

    He added that firms are required to consolidate investments where investor has less than 50 per cent control to ensure transparency, adding that financial institutions are guilty of this misconduct. He said such actions would not be tolerated under IFRS implementation.

    Former President, Manufacturing Association of Nigeria (MAN), Alhaji Bashir Borodo said IFRS is still the most realistic antidote to problems relating to compilation and production of financial reports.

    He said the IFRS option is a more viable and error-free system, when compared with what obtained in the past. He said manufacturing companies have no choice than to comply with IFRS.

    “Ultimately, this is the way to go in Nigeria, not minding the fact the country is lacking technical expertise to execute the IFRS. The reason is because the idea will check financial malpractices,” he added.

  • MDAs to implement new accounting rules in 2013

    Ministries, Departments and Agencies (MDAs) will start implementing the International Public Sectors Accounting Standards (ISPAS) from January next year, the Accountant-General of the Federation Mr Jonah Otunla has said.

    Speaking during the Ninth Financial Reporting Council (FRC) Summit in Lagos, Otunla said the aim is to reduce abuse of public funds and encourage the good corporate governance.

    He said with the new accounting standards, the government will be able to know and record income when it is received, adding that It will also help in recording expenses when cash is paid out for certain developmental projects.

    ISPAS is a set of high quality independently developed accounting standards aimed at meeting the financial reporting needs of the public sector.

    The idea, he said, would serve as an alternative to the International Financial Reporting Standards (IFRS) conceived for privately quoted entities globally.

    He said the International Public Sectors Accounting Standards Board (ISPASB), United States developed the standards, adding that it has been adopted by governments in the developed economies to ensure uniform, strong and effective management of public funds.

    Also, a partner with Deloitte, an accounting firm, Mr Uwadiae Oduware, said the government is committed to the implementation of the international public sectors accounting standards to encourage good fiscal management and subsequently block loopholes through which funds are stolen from the public purse.

    He said the government through the Office of the Accountant-General of the Federation (AGF) has communicated the issue to agencies of the Federal Government.

    He said the adoption of the standards was long overdue because other countries, including Benin Republic, Ghana, and Kenya had long adopted ISPAS to foster growth.

    He said at the end of the implementation of the standards, the government hopes to deliver to the nation, a Standardised Uniform Chart of Accounts, Budget and General Purpose Financial Statements that will meet international best practices as required by ISPAS.

    Oduware said users of government’s financial statements would see more transparency, accountability and integrity in the statements when the standards would have been adopted next year.

    He said the ISPAS cash basis will be implemented with effect from the 2013 financial year, while the ISPAS accrual basis will come into operations in 2015.

    ISPAS accrual basis is the accounting method that in which each item is entered as it is earned or incurred regardless of when actual payments are received.

    He said the standards would build confidence of donor agencies, improve service delivery, enhance public-private partnership, and boost peer review mechanism of financial reports of the three-tiers of governments and governments of other countries.

    Other benefits of the adoption are better access to financing through either bond releases or international financing from organisations, such as the International Monetary Fund (IMF) and the World Bank.