By Stanley Opara

Wednesday, 16 Feb 2011

The adoption of the International Financial Reporting Standards will guarantee better working condition for employees in Nigeria, analysts at KPMG Professional Services have said.

They said IFRS covered all types of employee benefits while the Nigerian Statement of Accounting Standards addressed only retirement benefits.

A partner at KPMG Professional Services, Mr. Dimeji Salaudeen, who presented a paper on behalf of the firm, titled, “IFRS Transition Strategy: Role of the Board, Management and Audit Committees,” at an IFRS forum in Lagos, said some standards in IFRS like financial instruments, share-based payments, revenue, among others, were absent from the Nigerian SAS, which is currently in use.

He noted that IFRS should be fully embedded as the primary financial reporting standard throughout a company, including its subsidiaries), and not just at the consolidated group level.

“It is a board-level issue and hence the conversion to IFRS should be sponsored by the entire board. Early preparation is recommended to allow for a smooth transition to IFRS,” he added.

Commenting on the impacts of IFRS adoption on businesses, Salaudeen explained that challenges relating to management of increased volatility of financial results were effectively checked under the standard.

Evaluating happenings in the Nigerian financial system, he said there was the need for the new reporting requirements to be understood by executives and analysts to avoid misinterpretation. He said, “For example, certain financial guarantee contracts may qualify for recognition as liability under FIRS.”

In the same vein, he added, “There is the need for change in the company’s budgeting system in line with IFRS. Management needs to run the business on IFRS basis for at least a year before publishing results.”

Experts at KPMG, however, advocated the assessment of the system and process impacts of IFRS by firms on their financial reporting and consolidating systems. They noted that changes might be required to systems and ledgers in order to provide additional IFRS data.

They said that changes might need to be made to the organisation’s strategic information system in order to generate information useful within the IFRS environment.

According to them, new procedures will be designed to enable fully embedded “business as usual” IFRS reporting.

“Senior executive-level sponsorship is needed as well as timely involvement of investor relations. There is also the need to develop communication plan for all stakeholders and plan for adequate training and knowledge transfer for management and employees, with rigorous project and a changed management,” the reports said.

Source: Punch