The Financial Reporting Council of Nigeria (FRC), has through its Public Notice of 16 August 2021, reiterated and reminded stakeholders, especially preparers and auditors of financial statements of Public Interest Entities (PIEs) in Nigeria, of the filing requirements and financial obligations of entities and professionals under the FRC Act. According to the FRC (or the Council), these requirements are part of its efforts to promote sound financial reporting and corporate governance in Nigeria.
The filing requirements and obligations include:
- Requirement for copies of annual reports and financial statements of public interest entities to be submitted to FRC by the preparers within 60 days of the approval by the Board.
- Where financial reports of PIEs have been qualified, copies of such reports with detailed explanation of such qualifications from auditors of the financial statements are to be submitted to FRC within a period of 30 days from the date of such qualification, and such reports shall not be announced to the public until all accounting issues relating to the reports are resolved by the Council.
- Where a Public Interest Entity files any financial statements and report with any government department or authority, the entity is required to also file a copy of the financial statements and reports with the Council within 30 days, in such manner as may be set out in the rules of the Council.
- Requirement for all professionals involved in the financial reporting process of Public Interest Entities to register with the Council and pay their ANNUAL levies as at when due. The FRC has made known via the Public Notice, its intention to publish a list of all delinquent debtors (entities, officers of entities, auditors and all other professionals involved in the financial and corporate governance reporting of entities) within four weeks from the date of theNotice (16 August 2021) in addition to all other regulatory sanctions.
- FRC Certificate of Registration is to become one of the requirements for employment of a professional, submission of contract bid, expression of interests, rendering of services etc., by contractor, consultants and other professionals doing business or seeking to do business with Public Interest Entities.
- Requirement for every Public Interest Entity to pay annual levy to the FRC based on its annual market capitalization or annual turnover.
According to the Notice, filing of annual reports and financial statements with the Council, within the stipulated timelines, is a crucial statutory requirement aimed at enhancing accountability, transparency, audit quality, increased trust in Nigerian markets and overall investor confidence in the economy.
The FRC Act describes “Public Interest Entities” as governments, government organizations, quoted and unquoted companies and all other organizations which are required by law to file returns with regulatory authorities and this excludes private companies that routinely file returns only with the Corporate Affairs Commission and the Federal Inland Revenue Service. The Notice particularly draws attention to the following categories of reporting entities where, according to the Council, compliance has been relatively low:
- Governments, Government Organizations, including Parastatals and Agencies of Government.
- Capital Market Operators, including Stockbrokers, Issuing Houses, Asset Management Companies, Registrars,etc.
- Central Bank of Nigeria Licensees including Microfinance Banks, Finance Companies, Non-interest Banks, International Money Transfer Operators, Payment Solutions, Bureau De Change Operators, etc.
- National Health Insurance Scheme Licensees including Health Management Organizations.
- Nigerian Communications Commission Licensees.
- Department of Petroleum Resources Licensees.
- All private companies that routinely file returns with any government regulator other than those that file only with the Corporate Affairs Commission and the Federal Inland Revenue Service.
While the intention behind this renewed push by the FRC may be healthy, particularly for transparency and increased investor confidence, the Council should consider the myriads of requirements by different levels and categories of Regulatory bodies, facing PIEs and professional accountants/ consultants generally, in Nigeria. To reduce the burden of compliance on stakeholders, the Council may consider working in partnership with/ through other Regulators, such as the Securities and Exchange Commission (SEC), the Central Bank of Nigeria (CBN), Institute of Chartered Accountants of Nigeria (ICAN), Nigerian Communications Commission (NCC), Department of Petroleum Resources (DPR) etc., in ensuring that the same financial transparency/ credibility goals and compliance with the FRC Act are achieved.
* Copies of codes, guidelines, regulations, rules, standards, and other publications of the Council can be found at www.financialreportingcouncil.gov.ng.