According to an assessment of the accounting and auditing environment in Nigeria conducted by the World Bank in 2004, Nigerian Statements of Accounting Standards (SASs) are based on the International Financial Reporting Standards (IFRSs). However, differences exist because the most recent revisions of IFRSs have not been incorporated into the Nigerian requirements, and some of the IFRSs have not been adopted. Overall, the World Bank concluded that the regulation of accounting and auditing practices was somewhat weak and recommended stronger enforcement mechanisms to improve compliance. One major recommendation was the creation of an independent oversight body responsible for the adoption and enforcement of accounting and auditing standards by public interest entities based on international standards. Simplified reporting requirements for small and medium-sized enterprises also should be developed. Following the assessment, the World Bank and the Nigerian Accounting Standards Board agreed on an Action Plan to issue IFRSs as SASs by September 2005. However, as of October 2007, no information on the actual implementation of the Action Plan is publicly available.

General Overview

From November 2003 to March 2004, the World Bank conducted a review of accounting and auditing practices in Nigeria in order to evaluate the weaknesses and strengths of the accounting and auditing requirements, and to review the reporting requirements against actual practices. This review involved the participation of representatives from the Nigerian regulatory, supervisory and industry bodies. International Financial Reporting Standards (IFRSs) and International Standards on Auditing (ISAs) were used as the benchmarks for assessing national standards. The Report on the Observance of Standards and Codes (ROSC) published in June 2004 as a result of the assessment was discussed in a Country Stakeholders Workshop in September of the same year. Based on the report's findings and recommendations, an action plan to improve the accounting and auditing framework in Nigeria was agreed upon. Per this action plan, the World Bank and the Nigerian authorities decided to issue IFRSs as Nigerian Statements of Accounting Standards (SASs) by September 2005. However, as of 2007, there is no indication that the plan has been implemented.

The legal framework for the preparation of financial statements in Nigeria is based on the Companies and Allied Matters Act (CAMA) of 1990. The CAMA specifies general requirements for the preparation of financial statements which, according to the World Bank assessment, differ from IFRSs. The Act empowers the Registrar of Companies at the Corporate Affairs Commission to monitor compliance with reporting requirements and impose sanctions in cases of non-compliance. The Nigerian Stock Exchanges Act of 1961, Institute of Chartered Accountants of Nigeria Act of 1965, Nigerian Deposit Insurance Corporation Act of 1988, Banks and Other Financial Institutions Act of 1991, Association of National Accountants of Nigeria Act of 1993, Investments and Securities Act of 1999, Securities and Exchange Commission Rules and Regulation of 1999, Nigerian Insurance Act of 2003, and the Nigerian Accounting Standards Board Act of 2003 supplement the CAMA in regulating financial reporting requirements of different types of companies. While acknowledging the work that has been done to reduce legislative inconsistencies, the 2004 World Bank ROSC pointed out that these efforts have resulted in "a situation where several bodies review and approve the audited financial statements of some companies before they are published. In some cases, the regulators have differed in their assessments of the quality of financial statements. There is a need, therefore, to streamline financial reporting and auditing requirements, harmonize regulatory arrangements, and codify them as a separate law" (pp. 1-2).

The responsibility for ensuring compliance with accounting requirements for banks and nonbanking financial institutions lies with the Central Bank of Nigeria (CBN), with the National Insurance Commission (NAICOM) for insurance companies, and with the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange for the securities market. In addition to the CAMA, financial reporting requirements for banks are specified under the Banks and Other Financial Institutions Act of 1991. The guidelines issued by the CBN on financial reporting are "in consonance with Nigerian Accounting Standards," according to the World Bank ROSC; however the CBN's ability to monitor compliance with the reporting requirements is constrained by its "outdated functions" and "reduced capacity." Similar weaknesses were identified for the insurance sector: NAICOM, which derives its power from the Nigerian Insurance Act of 2003, was found to lack "capacity to monitor compliance with financial reporting requirements" (p. 9) for insurance companies.

Disclosure and reporting requirements for listed companies are regulated by the SEC and the Stock Exchange. The Investments and Securities Act of 1999 does not specify the accounting standards to be followed by listed companies, because they have to comply with the CAMA requirements and use standards issued by the NASB. The World Bank ROSC also concluded that the SEC's ability to enforce compliance with accounting requirements is inadequate.

The SASs are set by the National Accounting Standards Board (NASB), which derives its powers from the NASB Act of 2003. The NASB was established in 1982 as a private sector initiative, but became a government entity accountable to the Federal Minister of Commerce in 1992. The World Bank ROSC found the NASB to be inadequately resourced to carry out its mandate. According to the report, "NASB has relied mainly on government subventions and has been exposed to serious budgetary constraints that prevented it from discharging its statutory role and affected its effectiveness" (p. 8). The ROSC further noted that although SASs issued by the NASB are based on the International Financial Reporting Standards (IFRSs), they have not been updated to conform with the revisions made to IFRSs, and do not cover some accounting areas. Besides, the World Bank pointed out that there were differences between "local accounting standard and actual practice" (p.12) leading to "compliance gaps" with the SASs in Nigeria. The main accountancy body - the Institute of Chartered Accountants (ICAN) - is responsible for the licensing of authorities involved in public audits and for conducting exams to certify qualified accountants. The ICAN is listed as a member of the International Federation of Accountants (IFAC) on the IFAC website.

The Principles

IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006)

II

There is insufficient information publicly available that directly addresses this principle.

IFRS 2: Share-based Payment (effective 2005)

II

There is insufficient information publicly available that directly addresses this principle.

IFRS 3: Business Combinations (effective 2004)

ID

According to the 2004 World Bank report, there is no equivalent standard in Nigeria. However, according to the NASB website, the NASB has issued an Exposure Draft (ED 28) on the proposed SAS on Business Combinations. According to the text of the ED, "the requirements of this Statement accord substantially with the requirements of International Financial Reporting Standard (IFRS) No. 3" (p.21).

IFRS 4: Insurance Contracts (effective 2006)

II

There is insufficient information publicly available that directly addresses this principle.

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005)

NC

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.

IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

II

There is insufficient information publicly available that directly addresses this principle. However, according to the World Bank report, the NASB issued a SAS for the oil and gas sector.

IFRS 7: Financial Instruments: Disclosures (effective 2007)

II

There is insufficient information publicly available that directly addresses this principle.

IAS 1: Presentation of Financial Statements (effective 2007)

II

There is insufficient information publicly available that directly addresses this principle.

IAS 2: Inventories (effective 2005)

NC

According to the 2004 World Bank report, under SAS "Limited disclosures [are] required. The allocation of fixed overheads to each unit of production is not based on the normal production capacity" (p.11).

IAS 7: Cash Flow Statements (effective 1994)

NC

According to the 2004 World Bank report, "there is no provision that the interest and dividends received and paid by financial institutions should be classified as operating activities" (p.11).

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

NC

According to the 2004 World Bank report, the national standard does not address a few key concepts of IAS 8.

IAS 10: Events after the Reporting Period (effective 2005)

II

There is insufficient information publicly available that directly addresses this principle.

IAS 11: Construction Contracts (effective 1995)

II

There is insufficient information publicly available that directly addresses this principle.

IAS 12: Income Taxes (effective 2001)

NC

According to the 2004 World Bank report, "recognition of current taxes [is] not addressed in SAS, and required disclosures are very limited" (p.11).

IAS 14: Segment Reporting (effective 1998)

II

According to the NASB website, the corresponding standard is SAS 24 on Segment Reporting. However, there is insufficient information publicly available.

IAS 16: Property, Plant and Equipment (effective 2005)

NC

According to the 2004 World Bank report, the SAS does not contain provisions relating to the initial measurement of PP&E.

IAS 17: Leases (effective 2005)

NC

According to the 2004 World Bank report, "a lease in favor of a contractor financing the development of landed property is excluded from the scope of the local standard. A specific standard relating to the exploitation of oil has been issued, which was excluded from the scope of IAS" (p.11).

IAS 18: Revenue (effective 1995)

NC

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.

IAS 19: Employee Benefits (effective 2006)

II

There is insufficient information publicly available that directly addresses this principle.

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984)

NC

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.

IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

NC

According to the 2004 World Bank report, "local standard [is] based on an outdated IAS version, [and] the treatment of foreign operations is substantially different" (p.11).

IAS 23: Borrowing Costs (effective 1995)

NC

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.

IAS 24: Related Party Disclosures (effective 2005)

II

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.

IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

II

There is insufficient information publicly available that directly addresses this principle.

IAS 27: Consolidated and Separate Financial Statements (effective 2005)

ID

There is insufficient information publicly available that directly addresses this principle. However, according to the NASB website, the NASB issued ED 29 on the proposed SAS on Consolidated and Separate Financial Statements. According to the text of the ED, "the requirements of this Standard accord substantially with the requirements of the International Accounting Standard No. 27 (Revised) - On Consolidated and Separate Financial Statements" (p.12).

IAS 28: Investments in Associates (effective 2005)

ID

There is insufficient information publicly available that directly addresses this principle. However, according to the NASB website, it issued ED 30 on the proposed SAS on Investments Activities. According to the text of the ED, "the requirements of this Standard accord substantially with the requirements of the International Accounting Standard No. 28 (revised) on Investment in Associates" (p.14).

IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990)

II

There is insufficient information publicly available that directly addresses this principle.

IAS 31: Interests in Joint Ventures (effective 2005)

ID

There is insufficient information publicly available that directly addresses this principle. However, according to the NASB website, the NASB issued ED 31 in February 2007 on the proposed SAS on Interests in Joint Ventures. According to the text of ED 31, "the requirements of this Standard accord substantially with the requirements of the International Accounting Standard (IAS) No. 31: Interest in Joint Ventures" (p.17).

IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005)

NC

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.

IAS 33: Earnings per Share (effective 2005)

II

According to the NASB website, the corresponding national standard is SAS 21 on Earnings per Share. However, there is insufficient information publicly available as to compliance of SAS 21 with IAS 33.

IAS 34: Interim Financial Reporting (effective 1999)

NC

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.

IAS 36: Impairment of Assets (effective 2004)

NC

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.

IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

II

According to the NASB website, the corresponding national standard is SAS 23 on Provisions, Contingent Liabilities and Contingent Assets. However, there is insufficient information publicly available as to compliance of SAS 23 with IAS 37.

IAS 38: Intangible Assets (effective 2004)

NC

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.

IAS 39: Financial Instruments: Recognition and Measurement (effective 2006)

NC

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.

IAS 40: Investment Property (effective 2005)

II

There is insufficient information publicly available that directly addresses this principle.

IAS 41: Agriculture (effective 2003)

NC

According to the 2004 World Bank report, there is no equivalent standard in Nigeria.