IFRSEF seeks cost consideration in new amendment to IFRS primary financial statement
The International Financial Reporting Standard Experts Forum (IFRSEF) Nigeria has called on the International Accounting Standard Board (IASB) to pay attention to peculiar problems of Nigeria and emerging markets in general in its current effort to amend primary financial statements.
“We wish to draw attention to ambiguity, complexity and lack of clear definition of certain proposals especially main business activity.
“We are also concerned with the requirement for additional disclosures that do not contain new information and are not useful information to providers of financial capital.
“The effects of ambiguity and additional disclosures that are not useful are increased implementation costs especially in emerging markets,” the IFRSEF said in its position on the recent Exposure Draft on primary financial statements by IASB.
IASB is responsible for issuing the International Financial Reporting Standard (IFRS) which Nigeria and some other emerging markets have adopted.
Recently, IASB issued an Exposure Draft on primary financial statements inviting comments from the public to enable it amends the statements.
Primary financial statements are statements of profit or loss and statement of financial positions and their notes.
However, IFRSEF believed that amendment if effected will mean that the way companies in Nigeria present their income statement and statement of financial position will change.
According to IFRSEF, companies are likely to incur heavy costs to implement the new changes. Such costs may include the cost of training for accountants and audit staff and investment to update the accounting system to be able to generate financial statements that comply with the amendment.
The call for comment on the exposure draft ended on 30th September 2020 while many organisations, including IFRSEF submitted comments and their positions to IASB on the proposed amendments.
IFRSEF in its response said it has approached the issues in the exposure draft from cost benefit analysis taking into consideration the peculiar circumstances of Nigeria and emerging markets in general.
On where IASB wanted to introduce disclosure of management performance information, IFRSEF said; “We do not agree that information about management performance measures as defined by the Board should be included in the notes to the financial statements?”
“These figures are already available within financial statements and can be assembled by analysts and users of financial statement.
“A requirement to disclose this in the notes to the financial statements is expanding IFRS financial statement which to preparers amounts to extra cost to produce information that does not increase the usefulness of financial information,”
“IFRSEF is of the view that the term ‘main business activity’ is defined in the ED but not clearly and sufficiently defined to remove all ambiguities.
“One question that has arisen from our jurisdiction is whether main business activities should be determined with reference to the object clause of the entity as contained in its incorporation document or should it be dominant income generating activity.”
The chairman of IFRSEF Innocent Okwuosa gave an insight into why cost benefit analysis was of concern to IFRSEF in their response.
“Most entities adopting IFRS in Nigeria are conscious of implementation cost and rely on external auditors and IFRS consultant. So ambiguity and additional disclosures that do not add value must be avoided at all cost,” Okwuosa said.
Jide Ibironke, the Secretary of IFRSEF agrees with Okwuosa on the need for IASB to be mindful of cost in all its amendments to IFRS.
The CFO of Coronation Bank Chuks Okoye who is a member of IFRSEF said the last thing banks in Nigeria want at this point is additional IFRS implementation giving what they are going through with IFRS 9 on Financial Instrument.
Another member of IFRSEF, Bolaji Osho, an IFRS consultant expresses the same view.
There is however a general agreement among IFRSEF members that the amendment to primary financial statements as proposed by IASB is good for financial reporting and welcomes it.