FRC publishes guidance note on preparing financial statements during COVID-19

The Financial Reporting Council of Nigeria (FRC) has released a guidance note on the preparers of financial statements during the COVID-19 period.

This is the second guidance note to be released by the council in two weeks.

The regulator said the guidance note is to ensure accuracy of financial reports and corporate disclosures, maintain a register of professional accountants and other professionals engaged in the financial reporting process; and advise the federal government on matters relating to accounting and financial reporting standards.

“The purpose of the guidance is for directors of reporting entities and those charged with governance to assess the risk of COVID-19 at an early stage of the financial reporting and audit process,” the guidance note published on the FRC website read.

“The guidance, therefore, serves to draw preparers attention to the possible impacts of COVID-19 on their businesses with the consequent financial reporting implications which they are expected to give particular attention to, all within the framework of the existing body of standards i.e. international financial reporting standards (IFRS).”

Some of the specific issues addressed in the guidance include “events after the reporting period, effects on interim financial reporting, changes in expected credit losses for loans and other financial assets, net realizable of inventories, group reporting, effects of government and regulatory relief programmes on entities and their customers and transparency and disclosures”.

The guidance stresses “the importance of providing all relevant disclosures related to actual and potential impacts of COVID-19 by preparers of financial statements in order to comply with the requirements of IFRS”.

The council also reminds preparers that they are expected to disclose the principal risks and uncertainties that they face because of COVID-19 outbreak in their interim reports.

“Regulated entities such as banks and insurance companies are encouraged to consider any guidance that may have been issued by their industry regulators as long as they do not contradict the provisions of IFRS,” the council said.

The regulator added that the “guidance does not in any way alter, remove or add to the requirements of financial reporting standards and that professionals are therefore still expected to exercise necessary judgements in the recognition, measurement, presentation and disclosure of information in their general-purpose financial statements in the context of the current pandemic”.