PML Advisory IFRS JAMBOREE 1 www.pml.com.ng
Overview of IFRS and its adoption in Nigeria 2 www.pml.com.ng
Nigeria IFRS road map On 28 July 2010, Federal Executive Council approved 1 January 2012 as the effective date to transit to International Financial Reporting Standards FRC(formerly NASB) announced a 3- phase implementation: Public interest entities 1 January 2012 1 January 2013 Other public interest entities Small and medium size entities 1 January 2014 3 www.pml.com.ng
Ni Nigeri geria a IFRS RS ro road map Public Interest Entities Other Public Interest Entities • Equities or debt instruments • Unquoted/private companies listed and traded in a public which are of significant public market interest because of their nature of business, size, or number of • Required by law to file returns employees or their corporate with regulatory authorities status which require wide range excluding routine returns filed of stakeholders. with CAC and FIRS 4 www.pml.com.ng
FRC’s definition of an SME No public accountability Debt or equity instrument not traded in public market Annual turnover < N500 million, Total asset < 200 million Do not hold assets in a fiduciary capacity for a broad group of outsiders as one of their primary businesses. No alien as board member No government agent as board member 5 www.pml.com.ng
Regulating IFRS Adoption Nigeria regulators are being proactive on IFRS adoption – FRC requires evidence of project planning and update from entities with respect to project progress plus supporting IFRS project documentations. Deadline of 15 January 2014 was fixed for phase 2. – FRC has also said “NO” to auditor working as IFRS Consultant to their clients – FRC has warned that auditors must not audit NGAAP financial statements 6 www.pml.com.ng
Accounting Standards Commonly referred to as Generally Accepted Accounting Principles (GAAP), these set of standards/guidelines provide basis for the preparation of financial statements and accountants must comply with them. They are just like laws to the accountant. 7 www.pml.com.ng
What is IFRS? International Financial Reporting Standards (IFRS) is an international accounting standards issued by International Accounting Standards Board and its predecessor’s bodies ‘International Accounting Standards Committee’. Before adoption of IFRS, Nigeria was using Statement of Accounting Standards popularly refer to as the Nigeria GAAP issued by Nigeria Accounting Standards Board. 8 www.pml.com.ng
International Accounting Standard Board IAS ASB was founded nded on Ap April il 1, 2001 1 as the successor cessor to the Inter ernati national onal Ac Accoun ountin ting g St Standar dards ds Committ mmittee ee (I (IAS ASC). C). It is responsible ponsible for r deve velo loping ping International ernational Financi ancial al Reporti orting ng St Standards dards (the new name for Intern rnatio tional nal Ac Accoun ounting ting St Standar dards issued ued after er 2001) 1), , and promotin omoting g the use and applica lication tion of these standar dards. ds.. 9 www.pml.com.ng
Composition of IFRS IFRS comprises of: IFRS • IFRSs • IASs • IFRIC • SIC IFRICs IASs IFRS SIC 10 www.pml.com.ng
IFRSs refers to set of standards issued by the International Accounting Standards Board successor’s to IASC IFRS IFRICs refers to IASs refers to set set of standards of standards issued issued by the by the International International Accounting IFRS IFRICs IASs Financial Standards Reporting Committee, the Interpretation predecessor’s of Committee of IASB IASB. SIC SICs refers to set of standards issued by the Standard Interpretation 11 Committee of IASC www.pml.com.ng
IFRS adoption globally • China • Hong Kong IFRS is used in over 120 countries • Russia • EU countries - UK - Germany - Spain - Netherland etc • Africa - Kenya - Zimbabwe - South Africa Countrie ries seeking g converg rgence with the IASB or pursuin ing g - Zambia adopt ption ion of IFRS - Ghana Countrie ries that require or permit IFRS or have fixed d dates to - Sierra Leone implement - Canada - Nigeria 2012 12 www.pml.com.ng
IFRS RS adoptio ption n globally ally Top 10 global capital market IFRS is used in over 120 countries US US GAAP but IFRS allowed Japan Converting to IFRS UK IFRS France IFRS Canada IFRS Germany IFRS Hong Kong IFRS Spain IFRS Switzerland IFRS or US GAAP Australia IFRS 13 www.pml.com.ng
First time adoption of IFRS First IFRS Annual IFRS Comparative Transition Date financial statements (IFRS/SAS) period 1 January 2012 31 December 2012 31 December Opening IFRS 2013 Statement of Financial Position 14 www.pml.com.ng
Why IF Wh IFRS? S? • Present financial information in one language; • Facilitate greater access to world capital markets; • IFRS bring more transparency • Attract acquisitions and divestments through greater certainty and consistency of accounting information and interpretation. • Financial statements presented with the eye of the management. • Increase portability of skills across jurisdictions; • Provide a level playing field for multinational corporations to apply common accounting methods across their subsidiaries 15 www.pml.com.ng
Challe Ch llenge nges s of IFRS S ado doption ption • Extensive training required for employees, investors and Board members. • Complexity of the new requirements • Concern about consistency of application. • Lack of internal knowledge • Cost of IFRS project, quite expensive to implement. 16 www.pml.com.ng
Lessons learnt from implementing IFRS and key issues 17 www.pml.com.ng
Lessons learnt from implementing IFRS Delay in starting IFRS projects: due to - Non availability of funds to kick start the project - Bureaucratic bottleneck in some organisation 18 www.pml.com.ng
Lessons learnt from implementing IFRS Express conversion of IFRS - Converting the financial statements on the face of it - The trial balance still report NGAAP figures - Annual conversion of the financial statements will be required - Management account still continue to report NGAAP figures - Budget will continue to report NGAAP figures - Express conversion less expense but more costly - No general IFRS training for accounts/finance staff 19 www.pml.com.ng
Lessons learnt from implementing IFRS Systems and processes are not IFRS complaint - IFRS conversion is more than just financial statements - IFRS conversion have systems impact - IFRS conversion have process impact - IFRS conversion have business impact - IFRS conversion have overall impact on the organization including those charged with governance (TCWG) 20 www.pml.com.ng
Lessons learnt from implementing IFRS Managing IFRS Reporting post implementation - A lot of accountants still presents NGAAP management account to their management. - In some instances, NGAAP management accounts are still prepared for auditors 21 www.pml.com.ng
Lessons learnt from implementing IFRS Evolving a framework to monitors changes in IFRS. - Being abreast of amendment to the existing standards - Being abreast of new IFRS standards The above can be achieved via Continious training Subscribe to ifrs.org and ias.com 22 www.pml.com.ng
Lessons learnt from implementing IFRS Non availability of project team to supervise and manage IFRS transition - Project steering committee - IFRS project manager 23 www.pml.com.ng
Lessons learnt from implementing IFRS Creating policies to support business decisions - Most organisation do not have a documented risk management framework - Most organisation do not have a documented capital management framework - Lack of documented process manual document in some organisation - Corporate governance document is not always available in some organisation 24 www.pml.com.ng
Lessons learnt from implementing IFRS • Customizing accounting system to be IFRS complaint/acquiring IFRS complaint system - The end process of IFRS conversion is the preparation of an IFRS compliance financial statement - Automate IFRS financial statements - Acquire an IFRS reporting tool 25 www.pml.com.ng
IFRS 1: FIRST TIME ADOPTION OF IFRS • Reconciliation of equity from previous GAAP to IFRS at transition and comparative year end • Reconciliation of comparative year’s net profit under previous GAAP to IFRS • Sufficient detail to understand adjustments to each line item • Information on optional exemption and mandatory exception applied 26 www.pml.com.ng
IAS 1: Presentation of financial statements • Setting up of statement of changes in equity • Rename balance sheet and profit and loss statement • Identifying other comprehensive income items. • Information on new standards adopted during the year and standards issued but not earlier adopted or yet effective. • Other regulatory requirements outside IFRS • Whether the operating expenses will be presented based on nature or function and reconciliation of presented numbers 27 www.pml.com.ng
Recommend
More recommend
