In 2010, the Central Bank of Nigeria (CBN), in a bid to integrate the banking system into the global best practices in financial reporting and disclo sure, commenced partial adoption of the International Financial Reporting Standards (IFRS) in the Nigerian banking system.
The move, according to the CBN, was to enhance market discipline and reduce uncertainties which limit the risk of unwarranted contagion.
To achieve full adoption of the IFRS, the Nigerian Accounting Standards Board (NASB) inaugurated a Roadmap Committee of Stakeholders on its adoption. Members of the committee are NASB, Federal Ministry of Finance (FMF), NDIC, SEC, NAICOM, PENCOM, Federal Inland Revenue Service (FIRS), and Institute of Chartered Accountants of Nigeria (ICAN).
There is no doubt that the adoption of the IFRS for the first time will prove a herculean task for the operators as this will have serious impact on reporting globally. This is why all efforts should be on ensuring the collaborative efforts of the committee, with the hope of having a common approach among banks and between companies.
At the end of the day, it is the same companies that will be better for it as it will engender confidence, with the attendant increased patronage that will positively impact on the bottom-line.
IFRS is a set of accounting rules for preparation and presentation of financial statements. It consists of standards issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC) for a uniform international financial reporting. It represents a major change for both the banks and quoted companies, which results also in changes in internal systems, business processes, performance management, and external communications, among others.
The implication of the new reporting format is that banks and quoted companies are at the end of the financial year expected to embark on full disclosure of their activities to the extent that it should be understandable to both the shareholders and investors, while at the same time in compliance with international best practice.
This is so because while the banks and firms were able to evade the full disclosures in their balance sheet in the past, depending on the performance of some of the securities like bonds, the new IFRS requires the banks to be transparent in their reporting format, irrespective of the performance of the securities so as to bring out the real performances of the companies.
Interestingly, the issue formed the major fulcrum of discussion at the last Bankers Committee meeting. The committee expressed the need to develop a framework for common reporting among banks under the IFRS.
Hamda Ambah, executive director, First Securities Discount House (FSDH), captured the mood of the bankers after the meeting recently when she said, “There is need for harmonization and hence the need for all of us to come together for common framework. The Federal Government bonds form significant portion in our balance sheet. Treatment by the National Accounting Standards Board (NASB) was very prescriptive while IFRS is much more judgmental. Our concern is the need for consistency as single interpretation is necessary.
“The IFRS will have serious impact on reporting globally and we are concerned about the need for common approach among banks in the adoption of the standards for reporting. So we have agreed to have a common framework for common approach to adopting the standards in the preparation of financial statements.
“We have decided to have a major workshop that will bring together all stakeholders to examine and discuss the various issues and concerns as well as how to achieve a common reporting format.”