FRAMEWORK
OF FINANCIAL
REPORTING
AND THE
ENVIRONMENT
PROF JANE. O. M ANDE
DEPARTMENT OF ACCOUNTING
UNIVERSITY OF JOS, JOS
BRIEF – PROF JANE O.M ANDE
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Ahmadu Bello University,
Zaria
University of Jos, Jos
University of Ghana
HERS South Africa
Haggai Institute,
Singapore, Maui, Hawaii,
USA
Marthchem Co. kano
Industrial Training Fund,
Jos
ANAN, DG NCA, Jos
NUC, CBN, USAID,
Carnegie USA
African Accounting and
Finance Association
(AAFA)
WOMEN ENTREPRENEUR AND SOCIETY, 27
OCT. 2012
PREAMBLE
The
whole world is under
challenge – globalisation,
climate change, flooding,
bribery, corruption, taxation,
social media (good and bad),
instant for everything.
Accountants have added
financial globalisation. We do
not want ‘sunset clauses’ in our
profession.
PREAMBLE CONT.
The
paper is in four parts:
Financial Reporting
framework, Financial
Environment, Cases and
Multiple choice questions.
THE CHALLENGE
STANDARDIATION – Gives
Direction
INTRODUCTION
Accounting
in its simplest form
can be said to be the provision of
useful figures to people about
their resources. Based on this
need, accounting has to be
effective and efficient in data
handling and recording system.
Also there must be the ability to
use the system to provide
something useful for somebody.
USERS OF FINANCIAL REPORTS
Equity
investors
Loan creditors
Employees
Government analysts.
Business group, and the
General Public. Etc, etc .
NEEDS OF USERS
Some users want forward
looking information (Going
Concern), while others want
backward looking information
(Historical Cost).
Different users with different
purposes may require different
information from the same
item in the financial report.

Needs of Users Cont.
Different
users might require
different degrees of depth
and complexities from the
financial reports.
The Major Challenge of
Financial Reports
 You
cannot include all the information
required by all users in your financial
report. So what are we to do? Nations
refusing to adopt IFRSs can best be said
to be going through ‘the boiling frog
syndrome’.
While the introduction and
implementation of IFRS is challenging,
that of the environment is more.
Globalisation and the
Environment
Globalisation
of financial
reports is not extended to
globalisation of
environmental laws in various
countries. Multinationals need
to comply with the various
rules and laws of each
country.
The framework and concepts
used in IFRSs
The
framework for the
preparation and presentation
of financial statements was
replaced with the Conceptual
Framework issued by the
International Accounting
Standards Board (IASB) and
International Financial
Reporting Interpretations
Committee (IFRIC).
The framework and concepts
used in IFRSs Cont.
It should be noted that it
is not a standard or
constitution as there are
certain instances where
individual standards vary
from established
principles.

OBJECTIVE AND SCOPE
It
is the intention of this paper to
discuss the conceptual framework
of financial reporting by reviewing
the need for conceptual
framework and global standards,
the benefits to be derived from
such standardization, scope of the
framework, and implication of the
environment on financial reporting.
What is Conceptual
Framework all about?
 It
is the set out of concepts that
underlie the preparation and
presentation of financial statements
for external users to enhance
consistency across standards and
provide benchmark for judgements.
Preparers use conceptual
framework to develop accounting
policies in the absence of specific
standard or interpretation.
Purpose of Conceptual
Framework?
 To
assist in promoting harmonization
of regulations, accounting
standards and procedures relating
to the presentation of financial
statements by providing a basis for
reducing the number of alternative
treatments permitted by IFRSs;
 To assist national standard-setting
bodies in developing national
standards;
Purpose of Conceptual
Framework?
 To
assist preparers of financial
statements in applying IFRSs and in
dealing with topics that are yet to
form the subject of an IFRSs;
 To assist users of financial
statements in interpreting the
information contained in financial
statements prepared in
compliance with IFRSs;
Purpose of Conceptual
Framework Cont.
To
assist auditors in forming an
opinion on whether financial
statements comply with IFRSs;
To assist auditors in forming an
opinion on whether financial
statements comply with IFRSs;
Purpose of Conceptual
Framework Cont.
 To
assist the Board in the
development of future IFRSs and
in its review of existing IFRSs; and
 To provide those who are
interested in the work of the
International Accounting
Standards Board IASB with
information about its approach
to the formulation of IFRSs.
Why do we need global
standards?
The
world economies are
interdependent.
The financial crisis in many countries.
(Period of mattressing, window
dressing etc)
 Our Small and Medium Scale
Enterprises are now integrated into
the world economy.
Capital markets are now global.
Why do we need global
standards? Cont.
 Accounting
and auditing services
needed to be improved upon to
avoid sudden corporate failures.
 The production of high quality
information will facilitate the
allocation of global capital.
 Our standard setters had work plan
for the millennium years.
What Are The General Benefits
of Global Standards?
 Efficient
allocation of capital
globally.
 Attracts investment through
transparency and integrity of
reporting
 Reduces the cost of capital in
investment
 Increased worldwide investment as
barriers across countries is broken
What Are The General Benefits
of Global Standards? Cont.
 Cost
reduction and increased
efficiency
 Facilitates standardised information
systems
 Eliminates waste of time and
resources in carrying out
reconciliations
 Efficiencies in audit work
 Increased education and training
for professionals.
Benefits of IFRS to Nigeria
Helping
propel foreign direct
investments in Nigerian quoted
companies operating in the
country.
Encouraging full disclosures
measures meant to further
entrench sound corporate
governance in financial
reporting.
Benefits of IFRS to Nigeria
Lower
transaction costs for
preparers of financial reports since
they would be able to comply
with a single set of accounting
standards instead of multiple sets.
Protection of Auditors.
See
statistics of ppi.
Benefits of IFRS to Nigeria
Cont.
The long term value of holding up the
global universal standards of the
accounting profession. The guarantee
the production of quality financial
reports.
 The introduction IFRS is expected to
help disclose as much as possible
critical accounting areas that will help
the “going concern” aspects of a firm.

Total Investment Sector
28
Financial
Closure Year
Energy
Telecom
Transport
Water and
Sewage
Total
1990
0
0
0
0
0
1991
0
0
0
0
0
1992
0
1
0
0
0
1993
0
0
0
0
0
1994
0
0
0
0
0
1995
0
0
0
0
0
1996
0
0
0
0
0
1997
0
22
0
0
22
1998
0
28
0
0
28
1999
0
19
0
0
19
2000
0
76
0
0
76
2001
295
970
0
0
1,265
2002
462
848
0
0
1,310
2003
34
1,624
0
0
1,078
2004
0
1,070
0
0
1,070
2005
1,129
2,312
2,355
0
5,796
2006
0
2,535
262
0
2,797
2007
280
2,761
0
0
3.041
2008
0
2,995
382
0
3,377
2009
0
3057
0
0
3,057
2010
0
3036
0
0
2011
0
0
0
0
T0TAL
2,200
21,403
2,999
0
3,036
AAFA CONFERENCE SEPTEMBER 5-7, 2012, ABUJA,
0
NIGERIA
Source: http://ppi.worldbank.org/explore/ppi_exploreCountry.aspx?count...
26,602
Benefits of Standardization
ANAN FRC ACT WORKSHOP FEB 14-16, 2012
Inaugural lecture April 30, 2010
GROWTH IN BUSINESS
Global financial
standards
help businesses to
grow.
ANAN FRC ACT WORKSHOP FEB 14-16, 2012
Benefits of International Financial
Reporting
TRADITIONAL WORK STATION
 DOCUMENTS
 DOCUMENTS
 DOCUMENTS
DOCUMENTS SCANNED INTO
THE COMPUTER
CORPORATE GOVERNANCE –
ALL INCLUSIVE
Areas Covered by
Conceptual Framework?
1. The
objective of financial reporting;
2. The qualitative characteristics of
useful financial information;
3. The definition, recognition and
measurement of the elements from
which financial statements are
constructed; and
4. The concepts of capital and
capital maintenance.
Objective of Financial
Reporting
 The
objective of financial reports is to
provide information about the
financial position (Balance sheet),
performance (income statement),
and changes in financial position
(cash flow statement) of the reporting
entity that is useful to existing and
potential investors, lenders and other
creditors in making decisions
providing resources to the entity.
Some Uses of Financial Reports
Buying, selling, or holding equity
and debt instruments depends on
the expected returns on
investments like expected
dividends, market price increases
and principal and interest
payments.
 On the other side are lenders
providing credits or those settling
loans look out for principal and
interest payments.

Some Uses of Financial
Reports Cont.
Financial
reports also reveal the
results of management’s
stewardship of the resources
entrusted to them. The
information supplied by
management along with the
notes to the accounts assist
users in predicting the future
cash flow of the entity.
Information Needs of Users
of Financial Reports
 Assets,
Liabilities, Equity, Income
and Expenses, including gains and
losses, contributions by and to the
owners, the entity cash flow and
how efficient and effective the
entity’s management and
governing board have discharged
their duties in the use of the entity’s
resources. For instance how did
management and the Board
protect the entity from competition
and change in technology?
Characteristics of Qualitative
Information
Relevance
Faithful
Representation
Timeliness
Verifiable
Understandable
Comparable
Note Cost Constraints: Benefits
should outweigh cost
VARIOUS WAYS TO
COMMUNICATE
VERBAL COMMUNICATIONS
IFRS Has This Underlying
Assumption
 Going
Concern: An entity will
continue for the foreseeable future
under the Historical Cost paradigm
as well as under the Capital
maintenance in Units of Constant
purchasing power paradigm.
 An entity is assumed to be in
existence without the intention to
liquidate or curtail its operations.
GOING CONCERN UNDER
THREAT IN THE FAMILY -ENTITY
THREAT TO GOING CONCERN
– INTENSIVE CARE UNIT
ANAN FRC ACT WORKSHOP FEB 14-16, 2012
Example of Threat to Going
Concern
Spring Bank annual reports 2005- 2009
Classifications Under the
Financial Position
Asset
Liability
Equity
Performance:
Expenses
Income -
Capital Maintenance
Adjustments
Financial
Physical
Capital Maintenance
Capital Maintenance
At what point should elements
in financial statements be
recognised?
See
definitions of Asset, Liability,
Equity, Income and Expenses.
Also, the Concept of Materiality,
qualitative characteristics,
probability of future economic
benefit and reliability of
measurement should affect
recognition of assets, liabilities,
income and expenses.
Can you purchase an item
without knowing you did?
In
many entities using
information technology today, it
is becoming normal to
recognise income on accrual
basis without the knowledge of
the parties involved. However,
caution and restrain should be
exercised as the buyer has
options to exercise his/her right.
Environmental Factors
Affecting Financial Reports
Environmental
Factors affecting
entities internationally can stem
from natural hazards, man’s
own activities, such as those
associated with climate
change, or from the failure of
engineered systems, emissions
to air, water and land, and
waste disposal.
Environmental Factors
Affecting Financial Reports
 The
environmental laws vary from country
to country, so also the political, social and
economic differences in countries. For
instance, in Nigeria we have our
constitution and National Environmental
Standards and Regulations Enforcement
Agency (NESREA) Act guiding individuals
and businesses in Nigeria.
Examples of Environmental
Factors Affecting Financial
Reports
 Example
1: Drax Group Plc, Annual report
and accounts 2007: Trading Overview
 Example 2. Green House Emissions:
Valuation
 Example 3: Tangible fixed Land, plant and
machinery and vehicles .
 Example 4: Events after the Balance sheet
 Example 5: IFRIC 6: Liabilities arising from
participating in a specific market.
CONCLUSION
 While
the environmental aspect for
now is not mandatory for disclosure,
there is the need for consistency,
comparability, relevance and
reliability, and an integration of
environmental information within
annual financial reports in order to
have full disclosure for current and
future decisions.
PROFESSIONAL ACCOUNTANTS
THE GLOBAL FINANCIAL RACE
IS ON.
INTERNATIONAL FINANCIAL
REPORTING STANDARDS
Do not just adopt
Do not just Adapt
Advance
the science of
International financial
reporting Standard
irrespective of the
environment.
Don’t be Irrelevant. Thank You
ANAN FRC ACT WORKSHOP FEB 14-16, 2012
APPENDICES
 Appendix
I: International Financial
Reporting Standards (IFRSs)
 International
Financial Reporting
Interpretations Committee (IFRIC)
 Standing
Interpretation Committee (SIC)
 Appendix

II: Multiple Choice Questions
QUESTIONS /DISCUSSIONS
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framework of financial reporting and the environment