ACC121 - INTRODUCTION TO INTERNATIONAL FINANCIAL REPORTING

STANDARDS (IFRS)
THE JOURNEY TO IFRS:-
A standard is a quality or a measure (in terms) of comparative evaluation.
A financial statement is a written record that conveys or expresses the activities of a business
and its financial performance to the intended users.
The 3-fold objective of financial statement is to provide information about the financial
position, performance and cash flows of an enterprise that are useful to a wide range of users
in making economic decisions.
Accounting as a field or profession has its languages used in communicating the financial
results and health of an enterprise to various interest groups by means of periodical financial
statements. Like in English language, grammar is the set of rules that English language uses
to convey meaning. These accounting languages are guided by sets of rules and these rules
are called Accounting Standards. Grammar is to English Language what Accounting
Standards are to Accounting Languages.
SOME IMPORTANT THINGS TO KNOW ABOUT ACCOUNTING STANDARDS
1. It brings transparency by enhancing the international comparability and quality of
financial information, enabling investors and other market participants to make
informed economic decisions.
2. Accounting Standards strengthen accountability by reducing the information gap
between the providers of capital and the people to whom they have entrusted their
money.
3. They also contribute to economic efficiency by helping investors to identify
opportunities and risks across the world, thus improving capital allocation.
SOME OBJECTIVES OF ACCOUNTING STANDARDS
1. To harmonise the different accounting policies for uniformity in the accounting
profession.
2. To improve the reliability of the financial statements.
3. To ensure comparability between inter-firm and intra-firm financial reporting.
A financial reporting system supported by firm governance, high quality standards and strong
regulatory framework is the key to economic development.
It is in this on this note that, the role of an independent, global standard-setting body such as
the International Accounting Standards Board (IASB) is of critical importance.
WHY STANDARDISE ACCOUNTING REPORTING SYSTEM?
To ensure orderliness, consistency and uniformity in the accounting profession worldwide.
IASB – Is an Independent Accounting Standard setting Body at the International level.
It was established on the 1st of April, 2001 to succeed International Accounting Standard
Committee (IASC) that was established in 1973.
The Accounting Standards issued by IASC were called International Accounting Standards
(IAS). However, these standards were adopted by IASB as they were still relevant and later
revised to become IFRS.
THE GOAL OF IASB – in creating IFRS, IASB was set to develop, in the interest of the
general public, a single set of high-quality, understandable, enforceable and globally accepted
FRS based on clearly expressed principles.
Financial Reporting Standard (FRS) - is a set of rules that guide firms in their preparation
of Financial Statements, so as to maintain: Consistency; Transparency; Reliability and
Comparability to/with other Financial Statements around the world.
WHAT IS IFRS - a set of guiding rules issued by International Accounting Standard Board
(IASB) on how firms should report their financial activities.
WHY IFRS?
It was created to serve as a common set of Accounting Languages around the world.
THE GOAL OF IFRS AS STATED BY IASB:
IASB sought to develop in the interest of the general public, a single set of high-quality,
understandable, enforceable and globally accepted Financial Reporting Standards based on
clearly articulated principles.
WAS THAT PURPOSE ACHIEVED?
We shall find out…..
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP): Refer to as a
common set of Accounting Principles, Standards and Procedures issued by Financial
Accounting Standard Board (FASB). FASB is a non profit making body responsible for
establishing accounting and financial reporting standards in the USA.
FASB was formed in 1973 to replace APB - Accounting Principles Board.
FASB versus IASB:
FASB is to America (USA) as IASB is to London (UK).
GAAP is to FASB as IFRS is to IASB.
FASB was formed in 1973 while IASB was established in 2001.
However, GAAP dates back to MAY 27th, 1933 during the Great Depression of the world, to
curb the financial wrongdoings of firms and to change Securities and Exchange Act of 1934 in
America.
In 2005, IASB championed the birth of a new era in global conduct of businesses, with the
effort to create the Financial Reporting Rules for a world-wide Capital Market. In that same
year, the 27 European Union (EU) member States with many other countries like Australia,
Nee Zealand, Russia and South Africa adopted IFRS. Since then, many countries have keyed
into it including Nigeria.
Now, over 120 countries around the world use IFRS as their Accounting Reporting Standard
(ARS).
With over 120 countries adopting the use of IFRS out of the 195 countries in the world today,
we can say IASB has gained popularity more than FASB, therefore, IFRS as purposed by IASB
is more widely used in the world than GAAP.
THE POSITION OF USA ON THE ADOPTION OF IFRS
The US Securities and Exchange Commission has said it would not switch to IFRS but will
continue to review IFRS proposal as to supplement the US’ Financial Filings, as GAAP has
been called the Gold Standard of Accounting.
IFRS replaced IAS. IAS thrived from 1973-2000. IASB replaced IASC - International
Accounting Standard Committee in 2001.
NASB – Nigerian Accounting Standard Board was inaugurated on the 9th of September, 1982.
It was the only independent standard setting body in Nigeria, responsible for the development
and issuance of Statement of Accounting Standards (SAS), for preparers and users of the
financial statements.
Section 335(1) of CAMA 1990, gave legal backings to the activities of NASB.
As development passed, it became necessary to review the lapses of NASB as many accounting
reporting inadequacies in the provisions of NASB led to manipulations of the financial
statements by some firms in Nigeria. In response to the concern of accounting reporting
insufficiencies, the Federal Government of Nigeria modified the provisions of NASB as
enacted in the Board’s Act No: 22, in 2003 under the leadership of President Olusegun
Obasanjo.
In the process of time, these modified provisions in NASB’s Act became inadequate in
comparison to Accounting Practices at the International level. On the 3rd of June, 2011,
President Dr. Goodluck Ebele Jonathan GCON, GCFR enacted the Financial Reporting
Council of Nigeria (FRCN) to replace NASB. However, the Statement of Accounting
Standards issued by NASB were retained and modified.
THE GOAL OF FRCN – To set standards for Accountancy in Nigeria.
CAMA - Companies and Allied Matters Act (CAMA) is one of the critical pieces of legislation
which enhances better business climate and promotes Micro, Small and Medium Scale
Enterprises (MSMEs) in Nigeria. The CAMA 1990 Act, which repealed CAMA act of 1968,
reshaped the business environment of Nigeria in the 90's. That happened again 2004, and again
in 2020. The Corporate Affairs Commission (CAC) of Nigeria was established in 1990 by
Companies and Allied Matters Act no 1 (CAMA) 1990[1] as amended, now on Act cap C20
Laws of federation of Nigeria.[2] Its establishment, structure and funding is now governed by
the Companies and Allied Matters Act 2020[3]. It is an autonomous body charged with the
responsibility to regulate the formation and management of companies in Nigeria.
Kindly ignore grammatical and typographical errors and use this material in context of the subject matter. THANK YOU!