Monday 18 March 2013

IFRS: CBN sets 2014 deadline for SMEs’ compliance

The Central Bank of Nigeria (CBN) has set up a roadmap On International Financial Reporting Standard (IFRS) stipulating compliance by all Small and Medium Scale Enterprises (SMEs) by January 31, 2014.

The roadmap, The Nation learnt, requires that the entire business community in the country would implement and converge in phases, while the phases are submerged within a general implementation framework. The general plan would therefore ensure that appropriate changes and restructuring are made to processes, systems and the personel in terms of training and capacity building.

The IFRS is a globally-accepted set of accounting standards, framework and interpretations, adopted by the International Accounting Standard Board (IASB and its interpretative body, the International Financial Reporting Interpretations Committee (IFRIC).

The IFRS was issued by the IASB. It was issued to serve as the global accounting language for the purpose of meeting the information needs of global business investors, shareholders and financial services providers.

The Financial Reporting Council (FRC) had earlier announced its decision to converge to IFRS in the last quarter of 2010, but the commencement date was later shifted to January 1, 2012 to ensure legal and capacity building in the project.

There has been mixed reactions to the IFRS, especially among the organisations in the first phase. The banking and discount houses sub-sectors had the greatest momentum, while most other corporations waited on their external auditors to drive implementation and compliance.

Risk Expert and Chairman, IFRS Interpretations Committee, at the IASB, Bob Garnett, had explained that harmonising the IFRS and Basel Accords will give Nigerian companies’ financials better credibility.

He explained also that the global knowledge and expertise reduces the risks of getting things wrong, adding that the adoption of the model will further enhance transparency and facilitate the restoration of investors’ confidence in the on-going efforts to sanitise and rebuild the financial services sector.
He said businesses would, therefore, be required to identify and understand the similarities and differences between the Nigeria General Accepted Accounting Practice (Nigeria GAAP), including changes that would occur within the transition period up to its full adoption and implementation.

He explained that for a truly global economy, where companies and accounts issuers interrelate around the globe, to be efficient, it is appropriate to have a common standard in business and financial reporting. IFRS therefore, became the set of high quality, transparent and globally renowned accounting standards and framework that provide for international comparison.

At the global level, such standards, he said are regarded as a major component of a good financial system that reduces cost of capital, allowing for transparency and disclosure, as well as facilitating increase in capital formation.

The world-wide adoption of IFRS is expected to facilitate presentation of financial information in a manner that allows and helps evaluators and users to determine the financial status and liquidity position of a company.

According to CBN, the number of countries that have either moved, or are in the process of moving, to IFRS increased to 117 involving more than 12,000 companies at end of December 2011 from 100 at end-December 2009. At end-December 2012, nearly 20 African countries, including Nigeria, had either adopted, converged to or made a commitment to implement IFRS.

It explained that in Nigeria, the bodies responsible for the regulation of accounting information are statutory agencies such as the FRC, the Securities and Exchange Commission (SEC), Nigerian Stock Exchange (NSE) and the CBN. The NASB, established in September 1982, under the sponsorship of the Institute of Chartered Accountants of Nigeria (ICAN), is a government agency statutorily responsible for issuing Statements of Accounting Standards (SAS) in Nigeria on various accounting matters, after taking into account all peculiarities of the business environment, customs, laws and level of development.

The banking watchdog explained that convergence to IFRS would promote uniformity in operations and auditing of companies. This is expected to have a significant impact on firms’ financial performance and ultimately on their financial position.

It said that implementation of the IFRS (Uniform Global Accounting Language) would, among other things, allow for easy access to efficient global capital; increase demand for, and enhance practice of public accountability and transparency; enhance understanding and ability to generate value from strategic activities and synergies; facilitate comparison between entities as well as enhance attraction and encouragement of foreign investors.

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