Economic sciences/7. Accounting and audit
Professor
Rozhkova N.K.
Professor
Blinova Y.U.
Offor
Chima M.L
Financial
University under the Government of the Russian Federation
Accounting in Nigeria
Nigerian Accounting Standards
Board Act No 22, 2003 was repealed and Financial Reporting Council of Nigeria
Act 2011 Enacted. This essay therefore attempts to vigorously study and
highlight the accounting standard in Nigeria the journey so far. It has been
widely argued that the passage of the Financial Reporting Council 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 with financial reporting standards in Nigeria. The
Author is hopeful that the essay will also increase the general awareness of
accountants as well as the preparer and keeping, transparency, uniformity,
comparability and enhancing public confidence in financial reporting [1].
Thus, failure on the part of
the firm to apply the requirements of accounting standard would result in
inconsistencies, which in turn results to poor financial reporting practices
and dissemination of accounting information that is of less value to any
particular group of users. This is because the preparation and presentation of
financial statements lacks objectivity, reliability, credibility and
comparability, and thus results in fraudulent business practices, which
subsequently lead to business failure, and become devastating on the national
economy [2].
Nigerian
Accounting Standards Board
NASB was established in 1982 as
a private sector initiative closely associated with the Institute of Chartered
Accountants of Nigeria (ICAN). NASB became a government agency in 1992,
reporting to the Federal Minister of Commerce. The Nigerian Accounting
Standards Board Act of 2003 provided the legal framework under which NASB set
accounting standards. Membership includes representatives of government and
other interest groups. Both ICAN and the Association of National Accountants of
Nigeria (ANAN) nominate two members to the board.
The primary functions as
defined in the act of 10 July 2003 were to develop, publish and update
Statements of Accounting Standards to be followed by companies when they
prepare their financial statement, and to promote and enforce compliance with
the standards. IASB had published many of the earlier standards prepared by the
International Accounting Standards Committee and its successor the
International Accounting Standards Board, but was more involved in enforcement
than in updating to the more modern International Financial Reporting Standards
(IFRS) [3].
Differences of IAS/IFRS
The IASB has developed IFRS
(International Financial Reporting Standards) in order to fulfill the public
interest for "high quality, understandable" and internationally
comparable Financial Statements. This is due to Globalization and the free flow
across borders of Capital.
There is a need for a single set of "rules" by which
accounting material is prepared. For example: in the past there was a case of a
manufacturer that was listed on the Stock Exchange in two countries (The US and
Germany- their home nation). They had to create two sets of financial
statements in order to fulfill the rules of the Stock Exchanges. This for one
had an added cost to the firm but also resulted in the firm publishing a
substantial profit in one country and a large loss in the other (due to the
different preparations). This basically negated any value that the Financial
Statements would have thus the need for International Standards so that
regardless of the countries listing country any investor could understand and
use their Statements [4].
Accounting Standards & Nigerian Companies?
In Nigeria, the Companies &
Allied Matters Act (CAMA) requires all registered companies to prepare
financial statements embodying among others the balance sheet and profit and
loss account of each company, for the review of the Shareholders, Directors,
Debenture Holders, and other stakeholders, of each company.
In the preparation of the
financial statements of a company, CAMA requires that both the preparers of the
financial statements, i.e. the Directors of the company, and the Auditors must
comply with the accounting standards and guidelines published by the Nigerian
Accounting Standards Board (NASB) [5].
Offences Under NASB Law
NASB is required to give Notice
of non compliance with the provisions of the NASB Law requiring compliance with
published accounting standards to a defaulting company. The NASB Law expects
that within sixty days of receipt of the Notice, the financial statement of the
company in question would be withdrawn by the company and amended in compliance
with the accounting standards published by NASB.
However, failure to prepare the
financial statements using the prescribed accounting standards, and presumably
after notice of non compliance is served on the defaulting company and no
amendment is made, is an offence which on conviction attracts a fine of
N5Million or imprisonment for a term of one year or to both the fine and the
term of imprisonment.
Accountants, Auditors and their
Firms, who are the key preparers of these accounts, are also captured by the
offences provisions of this Law. In addition to the fines and term of
imprisonment, where found guilty by a Court of Law, these professionals risk
the added punishments of outright proscription from ICAN or ANAN or delisting
for such periods as the Court may deem fit in the light of the circumstances of
each case.
Chart of Accounts in Nigeria
The purpose of a chart of
accounts in Nigeria is to secure a fixed structuring of the accounts created in
the bookkeeping. Typically, the chart is structured like accounts concerning
the day-to-day running of the company - show the company´s earnings and
expenses (Profit and loss); asset accounts - show the values in the company
(Assets); liability accounts - show the debt/financing of the company
(Liabilities).
Sample Chart of Accounts for a Small Company
This is a partial listing of
another sample chart of accounts. Note that each account is assigned a
three-digit number followed by the account name. The first digit of the number
signifies if it is an asset, liability, etc. For example, if the first digit is
a "1" it is an asset, if the first digit is a "3" it is a
revenue account, etc. The company decided to include a column to indicate
whether a debit or credit will increase the amount in the account. This sample
chart of accounts also includes a column containing a description of each
account in order to assist in the selection of the most appropriate account
[6].
CONCLUSION
The recent enactment of the
Financial Reporting Council Act 2011 appears to negate the apparent intention
of adopting international standards and sudden realization of recognizing the
local condition in our reporting framework. The writer is in strong support of
the Financial Reporting Council which will ensure high quality and set of
accounting standards [7].
References
1.
Van tendeloo, B. and Vanstraelon, A .( 2007). Discution of attribute
differences between US GAAP and IFRS earning: An exploration study. International
Journal of Accounting. Vol 42 pg 146-148
2.
http://www.wudpeckerresearchjournals.org/RJBMA/pdf/2013/January/Mary%20et%20al.pdf
3.
http://en.wikipedia.org/wiki/Financial_Reporting_Council_of_Nigeria
5.
http://www.oseroghoassociates.com/articles/91-nigerian-accounting-standards-board-law-practice
6.
http://www.accountingcoach.com/chart-of-accounts/explanation/2
7.
http://www.wudpeckerresearchjournals.org/RJBMA/pdf/2013/January/Mary%20et%20al.pdf