Tuesday, 22 May 2018

THE FINANCIAL REPORTING COUNCIL OF NIGERIA

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The Financial Reporting Council of Nigeria (FRC) was recently in the news for its ruling on the tenure of leaders of religious institutions. Many were torn between deciding whether the FRC was empowered to do so and whether this was even necessary at all. This article is not to decide one way or the other but to share facts about the FRC, what they are empowered by law to do, their functions and their objects. It also considers those who make up the board of the Parastatal.

The Financial Reporting Council of Nigeria is a federal government agency. The Financial Reporting Council Act is the law that establishes the FRC giving it its powers, functions and objects. The FRC develops and publishes accounting and financial reporting standards to be observed in the preparation of financial statements of public entities in Nigeria, and for matters that are related to this.

Composition of the Financial Reporting Council of Nigeria
The board of the Financial Reporting Council is made up of a Chairman (a professional accountant with significant professional experience in accounting practices), two representatives from the Association of National Accountants of Nigeria, two representatives from the Institute of Chartered Accountants of Nigeria, one representative each from the following offices: the Office of the Accountant General of the Federation, Office of the Auditor General of the Federation, Central Bank of Nigeria, Chartered Institute of Stockbrokers, Chartered Institute of Taxation of Nigeria, the Corporate Affairs Commission, Federal Inland Revenue service, Federal Ministry of Commerce, Federal Ministry of Finance, Nigerian Accounting Association, Nigerian Association of Chambers of Commerce, Industries, Mines and Agriculture, Nigerian Deposit Insurance Corporation, Nigerian Institute of Estate Surveyors and Valuers, the Securities and Exchange Commission, National Insurance Commission, the Nigerian Stock Exchange and the National Pension Commission. An Executive Secretary of the Council is also a part of the board.

The position of the law is that those who are to form the board of the Council must not be:

•    bankrupt or have suspended payments or compounds with creditors. 
•    convicted of a felony or of any offence involving dishonesty or fraud.
•    unsound mind or be incapable of carrying out their duties
•    guilty of serious misconduct in relation to their duties. 
•   disqualified or suspended from practising his profession in any part of the world by an order of a competent authority. This applies to those prospective members who have professional qualifications. 

If any of the above circumstances arises after a person has been appointed, then such a person should not continue in office.
What powers do the Financial Reporting Council have?
 
The FRC has the power to carry out certain activities. These powers are: 

•    To implement and approve the implementation of compliance with accounting, auditing, corporate governance and financial reporting standards in Nigeria
•    To enter into contracts that are necessary in discharging its functions.
•    The Council may also borrow such sums of money or raise such loans as it may require  in discharging its functions
•    It may cooperate with, or become a member or an affiliate of any similar international body whose objects or functions are similar to the Council’s.
•    It may exercise such powers as are necessary for giving effect to the provisions of the Act creating it.
•    It may also require entities to provide real time disclosures on material changes in their financial conditions or operations 
There is a more general provision made in the Act to the effect that the FRC has powers to do all things as are necessary for the performance of its functions. This means that acts of the FRC may come under the scrutiny of Nigerian courts where necessary in order to determine whether a particular action done is necessary to give effect to its functions. This is a wide provision that seems to give the FRC powers which may not be expressly stated in black and white but are incidental to its functions as prescribed under the FRC Act. A practical example of this is the enactment of codes to guide the activities of organisations which they administer. The FRC has a governance code for non-profit organisations, a public sector code and a private sector code.
What exactly does the Financial Reporting Council do?
•    It develops and publishes accounting and financial reporting standards to be observed in the preparation of financial statements of public interest entities.
•    It reviews, promotes and enforces compliance with the accounting and financial reporting standards adopted by the Council.
•    It receives notices of non-compliance with approved standards from preparers, users, other third parties or auditors of financial statements.
•   It receives copies of annual reports and financial statements of public interest entities from preparers within 60 days of the approval of the board.
•    It maintains a register of professional accountants and other professionals engaged in the financial reporting process.
•    It monitors compliance with the reporting requirements specified in the adopted code of corporate governance.
•    It promotes compliance with the adopted standards issued by the International Federation of Accountants and International Accounting Standards Board.
•    It monitors and promotes education, research and training in the fields of accounting, auditing, financial reporting and corporate governance.
•    It conducts practice reviews of registered professionals.
•    It reviews financial statements and reports of public interest entities.
•    It implements compliance with the FRC Act and the rules of the Council on registered professionals and the affected public interest entities.
•  It adopts and keeps up-to-date accounting and financial reporting standards, and ensures consistency between standards issued and the International Financial Reporting Standards
•    It specifies in the accounting and financial reporting standards, the minimum requirements for recognition, measurement, presentation and disclosure in annual financial statements, group annual financial statements or other financial reports which every public interest entity shall comply with, in the preparation of financial statements and reports.
•    It also performs other functions which in the opinion of the Board are necessary to ensure the efficient performance of the functions of the Council.
Everything, the FRC does is basically aimed at:
•    Protecting investors and other stakeholders’ interest.
•   Giving guidance on issues relating to financial reporting and corporate governance to professional, institutional and regulatory bodies in Nigeria.
•    Ensuring accuracy and reliability of financial reports and corporate disclosures based on different laws and regulations in existence in Nigeria.
•    Harmonising activities of relevant professional and regulatory bodies as relating to corporate governance and financial reporting.
•    Promoting the highest standards among auditors and other professionals engaged in the financial reporting process.
•    Improving the quality of accountancy and audit services, actuarial, valuation and corporate governance standards.

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