IFRS Capacity Building for Accountants

BY

ALH. RAZAK JAIYEOLACHIEF CONSULTANT

A.J.SILICON

The Myths & The Facts

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 comprises of •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

Overview

2

Overview cont’dOverview 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)

3

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.

4

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.

5

•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.

Benefits of adopting IFRS Cont’d

6

Impact of IFRS on the Entity’s Business

7

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 systemsInformation systemsInternal controlsAvailability and capability of resourcesCorporate income taxesEducation and trainingCommunication requirements (Stakeholder communications)Project management

Overview – IFRS is gaining groundOverview – IFRS is gaining ground

Require or permit IFRS Converging/converting to adopt IFRSPursing convergence but no plan to adopt yet

8

Nigerian GAAPSTATEMENT OF FINANCIAL

POSITIONINCOME STATEMENT

STATEMENT OF OTHER COMPREHENSIVE INCOME

STATEMENT OF CASHFLOWS

NIL

ACCOUNTING POLICIES

EXPLANATORY NOTES

NIL

IFRS BALANCE SHEET

PROFIT & LOSS ACCOUNT

NIL

STATEMENT OF CASH FLOWS

VALUE ADDESTATEMENTS

ACCOUNTING POLICIES

EXPLANATORY NOTES

FIVE-YEAR FINANCIAL STATEMENT SUMMARY

Similarities & Differences in Presentation of Financial Statements

9

• IFRS encourages componentisation

10

Componentisation of Fixed Assets

Conversion roadmap

Reporting Date:Transition Date:

2010 2012

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

11

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.

Conversion roadmap

Transition Date:2011

Reporting Date:2013

Reporting Date:Transition Date:

2011 2013

12

Small and Medium-size Enterprises (SMEs)

Conversion roadmap

13

Reporting Date:Transition Date:

2012 2014

2011

2010

2014

2013

2012

• Awareness• Assessment• Legislative changes• Training • Planning/ Impact

analysis• Transition

adjustments/ Opening BS (listed & SPE’s)

• 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

• 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

• IFRS reporting by OTHER SME’s

• Audit procedures• Investor

communications• Compliance

monitoring

Rationalization and standardization of statutory reporting

IFR

S C

ompe

tenc

e

Alignment with other initiatives and training for appropriate personnel

• Transition adjustments

• Prepare IFRS Opening Statement of Financial Position (SFP)

• “Dry Runs” for Listed & SPE’s

• Prepare comparative figures

Transition Date:Listed & Significant Public Entities (SPE’s)

Transition Date:Other Public Entities (PIE’s)

Reporting Date: (Listed & significant public entities) Transition Date:SME’s

Reporting Date: Other PIE’s

Reporting Date: SME’s

IFRS in Nigeria: Time for changeTransition to IFRS in Nigeria – NASB Roadmap

14

2010 2011

Historical data for IFRS reporting IFRS financial statements

Nigerian SAS financial statements

2012

IFRS in Nigeria: Time Line

15

Dual Reporting

IFRS Transition Date

IFRS Reporting Date

• 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

Challenges Of Adopting IFRS in Nigeria

16

17

Standards and Interpretations

1973 to 2000

International AccountingStandards (IAS)

Interpretations -Standing InterpretationsCommittee (SIC)

2001 onwards

International Financial ReportingStandards (IFRS)

International Financial ReportingInterpretations Committee (IFRIC)

In force today:41 IAS11 SIC

13 IFRS17 IFRIC

18

IFRS 1 First-time Adoption of International Financial Reporting Standards

IFRS 2 Share-based Payment

IFRS 3:

Business Combinations

IFRS 4 Insurance Contracts

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

IFRS 6 Exploration for and Evaluation of Mineral Resources

IFRS 7 Financial Instruments: Disclosures

IFRS 8 Operating Segments

IFRS 9 Financial Statements

List of IFRS

19

IAS 1: Presentation of Financial Statements.

IAS 2: Inventories

IAS 7: Cash Flow Statements

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors

IAS 10: Events After the Balance Sheet Date

IAS 11: Construction Contracts

IAS 12: Income Taxes

IAS 16: Property, Plant and Equipment (summary)

IAS 18 Revenue

IAS 19: Employee Benefits

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance

List of IAS

20

IAS 21: The Effects of Changes in Foreign Exchange Rates

IAS 23: Borrowing Costs

IAS 24: Related Party Disclosures

IAS 26: Accounting and Reporting by Retirement Benefit Plans

IAS 27: Consolidated Financial Statements

IAS 28: Investments in Associates

IAS 29: Financial Reporting in Hyperinflationary Economies

IAS 31: Interests in Joint Ventures

IAS 32: Financial Instruments: Presentation

IAS 33: Earnings per Share

IAS 34: Interim Financial Reporting

IAS 36: Impairment of Assets

IAS 37: Provisions, Contingent Liabilities and Contingent Assets

IAS 38: Intangible Assets

IAS 39: Financial Instruments: Recognition and Measurement

IAS 40: Investment Property

IAS 41: Agriculture

21

List of IFRIC

22

IFRIC 1:

Changes in Existing Decommissioning, Restoration andSimilar Liabilities

IFRIC 2:

Members’ Shares in Co-operative Entities

IFRIC 3 Emission Rights  Withdrawn June 2005

IFRIC 4:

Determining Whether an Arrangement Contains a Lease

IFRIC 5:

Rights to Interests arising from Decommissioning,Restoration and Environmental Rehabilitation Funds

IFRIC 6:

Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment

IFRIC 7:

Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies

IFRIC 8:

Scope of IFRS 2  Withdrawn effective 1 January 2010

List of IFRIC Cont’d

IFRIC 9 : Reassessment of Embedded Derivatives

IFRIC 10: Interim Financial Reporting and Impairment

IFRIC 11: IFRS 2: Group and Treasury Share Transactions  Withdrawn effective 1 January 2010

IFRIC 12 : Service Concession Arrangements

IFRIC 13 : Customer Loyalty Programmes

IFRIC 14: IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

IFRIC 15 : Agreements for the Construction of Real Estate

IFRIC 16: Hedges of a Net Investment in a Foreign Operation

IFRIC 17: Distributions of Non-cash Assets to Owners 23

List of SICSIC7: Introduction of the Euro

SIC 10:

Government Assistance – No Specific Relation to Operating Activities

SIC 12:

Consolidation – Special Purpose Entities

SIC 13:

Jointly Controlled Entities – Non-Monetary Contributions by Venturers .

SIC 15:

Operating Leases – Incentives

SIC 21:

Income Taxes – Recovery of Revalued Non-Depreciable Assets

SIC 25:

Income Taxes – Changes in the Tax Status of an Enterprise or its Shareholders

SIC 27:

Evaluating the Substance of Transactions in the Legal Form of a Lease

SIC 29:

Disclosure – Service Concession Arrangements

SIC 31 Revenue – Barter Transactions Involving AdvertisingServices

SIC 32 Intangible Assets –Website Costs

24

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 ….

25

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!

26

Major Challenge

Education & Training

?27

“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.

28

RAZAK JAIYEOLACHIEF CONSULTANT

A.J.SILICON

08034020754, 08055272046

info@ajsilicon.com

29