Towards Full Compliance To IFRS 9 By Banks. | Independent Newspapers Limited
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Towards Full Compliance To IFRS 9 By Banks.

Posted: Aug 22, 2016 at 2:00 am   /   by   /   comments (0)


The IFRS 9 is an International Financial Reporting Standard promulgated by the International Accounting Standards Board (IASB) and issued on July 24, 2014 globally. This single, principle-based approach replaces rule based IAS 39 financial instruments that were assessed to be complex and difficult to apply and targeted at addressing issues fueling Non Performing Loans (NPLs), among others, and enthrone a regime of substantially reformed approach to hedge accounting.

The new accounting standard, which is expected to fully come into effect on January 1, 2018, would usher in a “new expected-loss impairment model” that will require more timely recognition of expected credit losses. According to IASB, “IFRS 9 will remove the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value”.

Also, like all IFRS applications, the new standard is expected to promote cross-border listings as financial figures can now be more easily compared internationally, thereby engendering flow of investments into various economies.

However, on a worrisome note, the build-up to January 2018 by Nigerian financial institutions, which are supposed to latch on this standard, to reduce the profile of their respective NPLs and other loss generating centres, has not been encouraging. Indeed, with less than two years to the take-off of the scheme, only 9, out of the 22 banks in the country appeared to have prepared their systems for the new standard. Infact, investigations by Independent showed that other banks were yet to discuss the document, not to talk of putting in place implementation plan to meet the deadline.

Industry sources disclosed that the seeming apathy by most of the banks to the scheme has to do with the lack of manpower to railroad the execution, towards the January 2018 deadline. It was gathered that it would take a lot of skilled human efforts to prepare the standard’s applications for the banks, as most Nigerian accountants are not trained for the IFRS accounting standards.

The manpower crisis was however foreseen; hence, the IFRS Academy initiative, which was launched in 2014. A proposal for a N2 billion academy in Nigeria even came on board, through the Financial Reporting Council (FRC), to address the skill issue being faced by accounting practitioners in the country.

Indeed, FRSC disclosed in November 2013, that the academy would take off in the first quarter of the following year, to help companies build the needed capacity for effective implementation of the IFRS.

Today, not much has been done to actualise this proposal. Initial efforts were said to have been frustrated by fund paucity and alleged poor cooperation from the Institute of Chartered Accountants of Nigeria and Association of National Accountant of Nigeria. Besides, most of the banks in the country have not shown enough interest in the area of capacity building for the scheme, with some allegedly adopting procrastination disposition towards it.

We believe that the current lackadaisical attitude towards the implementation of the much needed IFRS 9 should be jettisoned, with proactive efforts garnered to ensure that the country, this time around, does not lag behind in promoting the fortunes of financial institutions, which are currently beset by discomforting situational factors in the financial sector in particular and the economy in general.

Therefore, current initiatives by various accounting bodies to jumpstart the IFRS Academy in the country should be supported by all stakeholders. It is salutary to note the steps being taken by KPMG, Shasat of UK and PWC in this direction.

With the current situation not soothing NPL profiles in the respective banks in the country, and the Federal Government’s avowed intention to attract more investors into the economy, relevant regulatory agencies and stakeholders should ensure that an improved attitudinal disposition by banks to the scheme is achieved, so that come January 1, 2018, Nigerian financial institutions are IFRS 9 compliant.