IFRS Capacity Building for Accountants

1. IFRS Capacity Building for Accountants The Myths & The Facts BY ALH. RAZAK JAIYEOLACHIEF CONSULTANTA.J.SILICON

2. Overview IFRS is an acronym for International Financial Reporting Standards issued by the International Accounting Standards Board (IASB). IFRS are considered a "principles based" set of standards in that they establish broad rules as well as dictating specific treatments. IFRS comprisesof • International Financial Reporting Standards (IFRSs) - standards issued after 2001 • International Accounting Standards (IASs) - standards issued before 2001 • Interpretations originated by the IFRS Interpretations Committee (IFRIC) - issued after 2001 • Standing Interpretations Committee (SIC) - issued before 2001

3. Overview cont’d By comparison, Nigerian GAAP is made up of the following: • The Companies and Allied Matters Act (CAMA) LFN 2004 • Statements of Accounting Standards (SAS) issued by the Nigerian Accounting Standards Board (NASB) • Other local legislation and industry specific Guidelines such as BOFIA, Prudential Guidelines, Insurance Act and SEC Rules • International best practice (optional)

4. IFRS in Nigeria • On Thursday 2 September, 2010, The Honorable Minister for Commerce and Industry, Senator Jubril Martins-Kuye announced the roadmap to the adoption of IFRS in Nigeria. • As a result, the Entity will be required to publish its financial statements in accordance with IFRS with effect from beginning 31 December 2012.

5. Benefits of adopting IFRS IFRS significantly improves the comparability of entities. IFRS provides more consistent financial information. IFRS are accepted as a financial reporting framework for companies seeking admission to almost all of the world’s stock exchanges. IFRS decreases investor uncertainty. IFRS increases market efficiency and minimizes the cost of capital. IFRS eliminates barriers to cross-border trading in securities, by ensuring that financial statements are more transparent.

6. Benefits of adopting IFRS Cont’d IFRS adoption may be used to make some strategic improvements to your finance systems. IFRS financial statements can both improve and initiate new relationships with customers and suppliers across national borders. IFRS removes the need for individual companies to prepare two set of financial statements, if all individual companies in the group apply IFRS. IFRS allows multinational groups to have a common accounting language, thereby improving management reporting and decision making.

7. Impact of IFRS on the Entity’s Business • The adoption of IFRS will impact all aspects of operations, decision-making and communications that are dependent on or based on reported financial results. • Entities will need to consider the impact on: • Accounting and reporting systems • Information systems • Internal controls • Availability and capability of resources • Corporate income taxes • Education and training • Communication requirements (Stakeholder communications) • Project management

8. Overview – IFRS is gaining ground Require or permit IFRS Converging/converting to adopt IFRS Pursing convergence but no plan to adopt yet

9. Similarities & Differences in Presentation of Financial Statements Nigerian GAAP IFRS • BALANCE SHEET • PROFIT & LOSS ACCOUNT • NIL • STATEMENT OF CASH FLOWS • VALUE ADDESTATEMENTS • ACCOUNTING POLICIES • EXPLANATORY NOTES • FIVE-YEAR FINANCIAL STATEMENT SUMMARY • STATEMENT OF FINANCIAL POSITION • INCOME STATEMENT • STATEMENT OF OTHER COMPREHENSIVE INCOME • STATEMENT OF CASHFLOWS • NIL • ACCOUNTING POLICIES • EXPLANATORY NOTES • NIL

10. Componentisation of Fixed Assets IFRS encourages componentisation

11. Conversion roadmap Listed & significant public entities (SPEs) • Entities with listed securities (domestic and foreign stock exchanges) • Government business entities e.g. NNPC • Unquoted entities like private banks and insurance companies Transition Date: Reporting Date: 2010 2012

12. Conversion roadmap Other public interest entities (Other PIEs) • Unquoted or private entities which are of significant public interest because of their nature of business, size, number of employees or their corporate status which require wide range of stakeholders. • Examples are large not for profit entities such as charities and pension funds. Transition Date: Reporting Date: 2011 2013 Reporting Date: Transition Date: 2013 2011

13. Conversion roadmap Small and Medium-size Enterprises (SMEs) Transition Date: Reporting Date: 2012 2014

14. 2014 • IFRS reporting by OTHER SME’s • Audit procedures • Investor communications • Compliance monitoring 2013 • IFRS/Quarterly reporting by PIE’s • Audit procedures • PIE Investor communications • Compliance monitoring for Listed & SPE’s • SME’s prepare opening SFP & comparative figs • PIE/SME Investor communications • Dry Runs’ for SME’s 2012 IFRS Competence • IFRS/Quarterly reporting by listed &SPE’s • Audit procedures • Investors communications • PIE’S prepare opening SFP & comparative figs • Dry Runs’ for PIE’s • SME’s commence transition planning 2011 2010 • Awareness • Assessment • Legislative changes • Training • Planning/ Impact analysis • Transition adjustments/ Opening BS (listed & SPE’s) Rationalization and standardization of statutory reporting IFRS in Nigeria: Time for change Reporting Date: (Listed & significant public entities) Transition Date: SME’s Transition Date: Other Public Entities (PIE’s) Reporting Date: Other PIE’s Reporting Date: SME’s Transition Date: Listed & Significant Public Entities (SPE’s) • Transition adjustments • Prepare IFRS Opening Statement of Financial Position (SFP) • “Dry Runs” for Listed & SPE’s • Prepare comparative figures Alignment with other initiatives and training for appropriate personnel Transition to IFRS in Nigeria – NASB Roadmap

15. IFRS in Nigeria: Time Line Dual Reporting IFRS Transition Date IFRS Reporting Date 2010 2012 2011 Nigerian SAS financial statements Historical data for IFRS reporting IFRS financial statements

16. Challenges Of Adopting IFRS in Nigeria Education and Training. Auditing IFRS-based financial statements What happens to our industry specific standards? Harmonization of legislations in financial reporting in Nigeria. Complexity and Structure of IFRS Frequency, Volume and Complexity of Changes in the IFRS. Challenges for SME and Accounting Firms. Challenges of Fair Value Accounting. The culture of secrecy. Cost Business Process and IT

17. Standards and Interpretations 1973 to 2000 2001 onwards International Accounting International Financial Reporting Standards (IAS) Standards (IFRS) Interpretations - International Financial Reporting Standing Interpretations Interpretations Committee (IFRIC) Committee (SIC) In force today: 41 IAS 13 IFRS 11 SIC 17 IFRIC

18. List of IFRS

19. List of IAS

22. List of IFRIC

23. List of IFRIC Cont’d

24. List of SIC

25. Take Away • IFRS is an acronym. • It comprises of ….. • The Nigerian GAAP is made up of the following… • The Impact of IFRS on the Entity’s Business include... • Some of the benefits of IFRS are… • Some Differences in Financial Statements are ….

26. Standards and Interpretations in force today IAS- 41, SIC- 11, IFRS- 13, IFRIC- 17 Conversion Roadmap • Listed & Significant Public Entities- 2012 • Other Public Interest Entities (Other PIEs)-2013. • Small & Medium-size Enterprises (SMEs)-2014. The Starting time is NOW!

27. Major Challenge Education & Training ?

28. “In a time of drastic change it is the learners who inherit the future. The learned usually find themselves equipped to live in a world that no longer exists”. Eric Hoffer, U.S. philosopher.

29. RAZAK JAIYEOLACHIEF CONSULTANT A.J.SILICON 08034020754, 08055272046 info@ajsilicon.com