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The Evolution Of FRC

Posted: Sep 5, 2016 at 7:26 pm   /   by   /   comments (0)

By Seun Onatoye

I have received over 100 responses from my followers in form of calls, text messages, facebook and twitter comments after my last publication on ‘’A case for FRC to Regulate Unquoted Companies in Nigeria’’. Three important questions been asked are: what is the origin of FRC? Does FRC want to take SEC functions?  What about IFRS Academy and the money allocated? I will take my time to clear the air on these issues over a series of publications. Personally, I tried to respond to all the comments individually, but I will always discuss the front burner issues  on financial regulations every Tuesday.

In Nigeria, the development of accounting and accounting standards could be traced to the then Association of Accountants of Nigeria – AAN (now ICAN). The AAN was formed on the 17th of November 1960 and granted official recognition on 28th September 1965, under the Act of Parliament of 1965, to regulate accountancy profession in the country. The Nigerian Accounting Standards Board sets local accounting standards under the Nigerian Accounting Standards Board Act of 2003. Originally established in 1982 as a private sector initiative housed in ICAN, NASB became a government agency in 1992 and reports to the Federal Minister of Commerce. Its membership includes representatives of government and relevant interest groups. It is worthy of note that NASB has gone through three phases of evolution. Private Organisation; Government Agency; and Organisation established by an Act.

The Board had relied on donations from the business community and on subscriptions by member organisations for its funding. However, with the formal inauguration of the Board in May 1992, it now receives subvention from the Federal Government. The then Minister of Trade and Tourism enjoined the Board to rely on the following sources for its funding. Annual grants from the Federal government through the Federal ministry of Commerce and Tourism; ii) Subscriptions from all members’ organisations; iii) Contributions and donations from the business community who are also the major beneficiaries from the Board’s publications. As a government agency, NASB has relied mainly on government subventions and has been exposed to serious budgetary constraints that prevented it from discharging its statutory role and affected its effectiveness. There is a dire need to hire additional staff, retrain existing staff, offer attractive remuneration packages, and procure equipment.

NASB Act No 22, 2003 was repealed and Financial Reporting Council of Nigeria (FRC) Act 2011 Enacted. The FRC is expected therefore to issue and regulate accounting, actuarial, valuation and auditing standards in the country. It has been widely argued that the passage of the Act would help to address the current institutional weaknesses in the regulation, compliance and enforcement of standards and development of robust arrangements for monitoring and enforcing compliance in Nigeria.

There was a sponsored research by the World Bank and International Monetary Fund (IMF) on the observance of standards and codes (ROSC) in Nigeria – Accounting and Auditing. Indeed, the evolution of NASB to FRC is similar to the evolution of International Accounting Standards Committee (IASC) to International Accounting Standards Boards (IASB). The G4+1 participated in the working group that eventually led to the transformation of the accounting standards setting body.  FRC was envisioned since 2004 and has been working with NASB and other stakeholders. The ultimate objective of World Bank and IMF was to set the ground for the adoption of International Financial Reporting Standards (IFRS). NASB in its old form did not have the capacity and capability to support that vision, hence the transformation of the organisation into FRC.