How an entity presents information in its financial statements is important because financial statements are a central feature of financial reporting –a principal means of communicating financial information to those outside an entity.
Accounting Standard Boards worldwide, including the International Accounting Standards Board (IASB), have all initiated projects on financial statement presentation to address users’ concerns that existing requirements permit too many alternative types of presentation and that information in financial statements is highly aggregated and inconsistently presented, making it difficult to fully understand the relationship between the financial statements and the financial results of an entity.
Stakeholders in the public entities are making efforts to ensure that available financial reporting system should not be deficient and proper attention be paid to variances from plans, thereby indicating the need for financial reports to be available on time as well as meet the reliability tests when produced.
One of the ways of doing this is the current efforts geared toward making sure that public entities in Nigeria fully adopt International Public Sector Accounting Standards (IPSAS) effective January 2013.
IPSAS aims at improving the quality of general purpose financial reporting by public sector entities, leading to better informed assessment of the resource allocation decisions made by governments, thereby improving transparency and accountability in the system.
In many states today, balance sheet audits, when performed, still routinely reveal major discrepancies. This is because in Nigeria for instance, the operation of government business and accounts has been within the general framework of the principles of fund accounting. The major problem is that the financial reporting structure is far from the principles in absolute terms, as such, compliance with relevant standards has at best been incidental.
Recently, Jim Obazee, executive secretary/chief executive officer, Financial Reporting Council of Nigeria (FRC) said at the Lagos State House of Assembly (Committee on Finance) 6th annual public finance lecture titled “Lagos State Financial Management Act and IPSAS Compliance:Implications for the State, Local Government and Agencies” that to embrace change, “the public accountability process must start with information about the policies that the government intends to pursue and the results it expects to achieve through those policies.
“This is the information that should be contained in the government’s budget. Budgetary practices in Nigeria are often stereotyped and inadequate to satisfy the accountability objective,” Obazee noted.
Speaking also at the lecture, Ngozi Okonjo-Iweala, minister of Finance/coordinating minister of the economy said the adoption of IPSAS in the public sector finance had become an important issue in the global financial reporting system, adding that accounting in the public sector is practised in a diversified way making comparison very difficult. Okonjo-Iweala, who was represented by Danladi Tifase, permanent secretary, Ministry of Finance, noted that the adoption of IPSAS would improve the quality of public sector accounting all over the country.
She said, “Currently, the Federal Government is implementing IPSAS in public sector accounting toward full migration into the IPSAS by 2013. The adoption of the required basis of accounting specifically IPSAS will lead to presentation of fair view of public finance and auditing towards achieving good governance. I wish to applaud the efforts of the Lagos State House of Assembly Committee on finance toward making the Lagos State public financial accounting IPSAS compliant. The government needs to develop the core officials dedicated with the skills in delivering this IPSAS project.”