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The Financial Reporting Council of Nigeria (FRC) has advised more organisations in the country to adopt the International Financial Reporting Standards (IFRS) to boost the country’s development and attract foreign direct investment (FDI).
The Chief Executive Officer of the FRC, Mr. Jim Obazee stated this at the 10th annual corporate financial reporting summit held in Lagos yesterday.
Obazee noted that in an increasingly interconnected global economy, many markets participants had been questioning whether it was possible or desirable to move toward a more uniform global language for financial reporting.
According to him, the proponents of such arguments had argued that a uniform set of globally-accepted high quality accounting standards, supported by strong governance, independence standard- setting and a sound regulatory framework could benefit investors and business alike.
Speaking on the investment opportunities for Nigerian companies if they adopt the IFRS, Obazee said: “Notice that in recent times a number of Nigerian companies have raised capital from international stock markets and some others have established significant presence in other jurisdiction. Also, a good number of Nigerian entities hold securities of non-Nigerian issuers.
“Therefore, for a better understanding and appreciation of the risk and consequences in making decisions about the flow of economic capital, it makes sense that financial statements prepared in Nigeria use global financial reporting benchmark.”
He also explained that the IFRS did not make it complex for investors and other users of financial information to understand accounting statements.
He added: “IFRS is more principle-based set of accounting standards than national accounting standards. As such it allows companies and auditors to focus less on strict adherence to detailed requirements and instead concentrate on providing a clear statement of an entity’s assessment of the economic realities of its business activities.”
Also speaking at the summit, the Group Managing Director/Chief Executive Officer of First Bank Nigeria Limited, Mr. Bisi Onasanya, pointed out that it would be difficult to separate governance from financial reporting, saying that “at the heart of financial misreporting is weak governance.”
According to Onasanya, any organisation that wants good financial reporting to strive, must create an environment for people who make mistakes to come out openly to admit they had made mistakes.
He further said: “Every strong organisation must have a strong internal audit to review the management account, no matter how short before it is presented to external bodies. When CEOs are also remunerated based on their profit they make, you put them under pressure."
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