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CBN lists benefits of IFRS

By on November 3, 2015

The Deputy Governor (Economic Policy), Central Bank of Nigeria (CBN), Dr. Sarah Alade, has highlighted the benefits of adopting the International Financial Reporting Standards (IFRS) to the banking sector as well as the economy.

Alade stated this in a keynote address at the launch of the Africa IFRS Academy (AIA) by KPMG Professional Services and Shasat UK Limited, in Lagos recently.

According to her, globalisation had been the major driver for uniform financial reporting standards. She pointed out that countries that adopt recognised international standards are better positioned to attract investors.

“Financial information needs to be relevant, reliable, understandable and comparable. It is therefore important for those seeking capital to prepare financial information in line with globally accepted standards.

“A common reporting framework helps those seeking capital to compete better globally. This provides credibility to financial reports; helps investors and protect other stakeholders from bias reporting. Other benefits derivable from the adoption of IFRS include a reduction in the cost of operations for multinationals and better coordination of internal and external reporting,” she explained.

From a regulator’s standpoint, the deputy CBN governor said enhanced disclosures and transparency required under the IFRS contributes to the reduction of vulnerabilities, which in turn strengthens the resilience of the banking sector.

She also noted that the requirements as regards financial reporting originated from the bankers’ committee core principles for effective banking supervision.

One of the conditions for effective banking supervision is the existence of well-developed public infrastructure, which includes among others, comprehensive and well defined accounting principles and rules that meet national requirement, she added.

“Rules and regulations exist in abundance, but the will to comply is often limited. Similarly, the ability of supervisors and other regulators to monitor compliance is always constrained by resources. The enhanced disclosure requirements of IMF imposes market discipline on the operators, such that those that have sound risk management practices are rewarded by the financial market,” Alade said.

According to her, more than 100 countries surveyed, had already adopted the IFRS.

“IFRS would help know the true conditions of banks in the course of their investment decision. Full disclosure under IFRS would also ensure the entrenchment of market discipline and sound corporate governance in the banking sector,” said further.