Documente Academic
Documente Profesional
Documente Cultură
ON
CONVERSION AND IMPLEMENTATION
OF
INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRS)
FOR
ARCHITECTS REGISTRATION
COUNCIL OF NIGERIA
(ARCON)
PREPARED
BY
TECHNICAL PROPOSAL
CONTENTS
PAGES
Table of Contents
1-2
1.
Introduction
2.
3.
Services
6 - 12
13
14
14
15
15
15
10
16 - 24
o Accounting Changes
o First Time Adoption of IFRS
o Accounting Policies
o Consolidation and Boundary issues
o Subsidiaries
1
o Associates
o Joint Ventures
o Non-Current Assets
CONTENTS OF TECHNICAL PROPOSAL (Contd)
CONTENTS
PAGES
o Investment Property
o Property, Plant and Equipment
o Intangible Assets
o Debtors
o Leases
o Finance Leases
o Operating Leases
11
Scope/Coverage
25
12
Deliverables
25
13
Project staffing
26
14
Resume
27 - 28
15
Project Assistance
30
16
Tools
30
17
30
18
30-31
19
Professional fee
31
20
32 - 39
INTRODUCTION
Heed Advisory Services Limited is honoured and pleased to present this technical proposal
for consideration by the management of Architects Registration Council of Nigeria
(ARCON)
We believe that our IFRS Technical Department, which consists of experienced and highly
qualified team of IFRS specialists (IFRS Team) is perfectly suited to assist, provide guidance
and manage the implementation of IFRS in a medium-sized group, with significant interest,
such as Architects Registration Council of Nigeria (ARCON)
At HASL, we are strategic and critical thinkers. We understand our core competency lies in
the integration of Strategy and Finance. It is from this platform that we leverage the business
services provided by HASL.
We also understand the power of inter-disciplinary collaboration and have established key
strategic alliances with select firms that provide Marketing, Sales, Research, Technology,
Strategy and Intellectual capital services to our clients.
We have the privilege of working with some of the best and brightest people in business
today. They all subscribe to our high standards of service and are able to roll up their sleeves
to get the job done.
BUSINESS ADVISORY SERVICES TO MEET YOUR NEEDS
HASL's business advisory services play an integral role in the leadership of business
development teams, business development strategy, and in the presentation of investment
opportunities to prospective investors and/or key stakeholders. Our job is to carefully analyze
and clearly communicate the value of each client's business strategy, financial projections,
and business plan.
THE BOTTOM-LINE ON FINANCIAL ADVISORY SERVICES
Our principal business strategy is to offer solid financial advisory services.
We work on mandates to make a real difference to our clients. The fees for our business
advisory services are competitive and can be structured to suite the specifics of your business
opportunity.
SERVICES
Heed Advisory Services Limited provides the client with objective analysis and
recommendations with respect to financial and investment opportunities, both business and
personal. The recommendations are developed from a total perspective of the client's
resources, objectives and investment temperament.
For many, our services provide the first opportunity to clearly think through their financial
and business goals.
Our programs are designed to help the client make informed decisions in terms of the client's
unique situation.
Heed Advisory Services Limited develops financial, investment and business programs
tailored towards individual and corporate entities goals:
FINANCIAL
1. Summarize the client's present resources - examining the economic mix and
positioning of capital in relation to the client's personal and business goals.
2. Co-ordinate the client's tax planning program.
3. Analyze present business opportunities - understanding the client's business and
assisting in making good business decisions.
4. Developing long term strategies to add value and accomplish the client's goals,
whether to an on-going business for sale at some future time or to own it forever for
transfer to the next generation.
5. Analyze the executive's compensation, retirement, and other benefit programs.
5
INVESTMENT
1. Examine the present investment program - assessing current investment risks and
returns to determine if any refinement or restructuring is appropriate to bring them in
line with the client's objectives.
2. Develop specific recommendations for future capital allocation as available for
investment.
3. Assist in assessing new investment opportunities that may arise to determine their
viability into individual or corporate plan.
The firm draws upon its broad financial backgrounds in the areas of accounting, taxation,
securities and investments to develop the client's coordinated program. Every aspect of the
service is performed under the strictest professional rules of confidentiality.
Heed Advisory Services Limited represents the client's interests exclusively.
Contract Structuring
LOAN MANAGEMENT:
Assisting clients in sourcing appropriate cash needed for business
operation/expansion with powerful and professional negotiation with the bank on
behalf of our clients.
We build business, banking and lending relationship to help our clients with their banking and
lending needs. We understand how best to present our client's financial information to them.
Any business that hires us will improve its chances to maximize business/banking
relationship.
Strong business, banking and lending relationships are key to a well financed business. A well
financed business can operate much more efficiently than cash strapped firms and can take
better advantage of business opportunities whenever they arise. Owners of businesses that are
well financed are better positioned than those who struggle with cash. Banks are the single
largest source of financing (cash) for businesses. Having strong business banking
relationships is paramount to having a well-financed and successful business.
Some companies, especially start-ups and those with little equity may have difficulty
borrowing from banks. There are times when other non-bank lenders can provide better
financing options than banks. Therefore, having strong relationships with other lenders such
as asset-based lenders, lessors, private investors and investment bankers can be very
important to business success.
Strong banking and lending relationships are based on trust and good communications
between the banker (lender) and the borrower. Providing lenders with accurate and timely
financial statements, good cash flow and income projections, and keeping them informed
about major business decisions and activities will go a long way in developing trust and
cementing a strong relationship.
7
Bankers/lenders will provide better financing for relationship-based borrowers who keep
them well informed about good news as well as otherwise in the business. Businesses that
have strong financial management and institute good financial procedures and controls
(corporate governance) will also be looked on favourably by bankers and other lenders.
HEED financing advisors on average, have worked and negotiated with lenders thereby
having strong relationship with many banks and alternative financing sources. Our business
financing advisors understand which banks and other lenders will serve your company the
best, based on your industry and company profile.
HEED Advisors will help you put together accurate and timely financial statements and
financial projections that will enable you secure a great financing package for your business.
In addition, HEED Advisors will determine the most appropriate mix and terms of financing
to best meet your companies needs, whether it be short term lines of credit, long term debt
and/or leases.
HEED Advisors will help you make better business decisions by helping you analyze your
business from a financial standpoint and by implementing a management reporting system
that gives you the information you need to make better and informed decisions. This will help
you increase profitability and drive your firm's growth, strengthening your company and its
business banking and lending relationships.
Working with banks and lenders can take substantial time and effort. HEED Advisors offers
CFO services that will take care of much of the work for you, allowing you to strategise for
improved business and increasing sales. Your banker/lender will also feel a sense of security
knowing that you have a top financial professional helping you with your financial
management and will reward your company with a stronger and more attractive financing
arrangement.
In summary, HEED Advisory Services can help you secure a better banking/lending
relationship which will ensure your firm is well-financed, has the most competitive rates and
terms; and will free you up to concentrate your time on growing the business. As an
additional benefit, knowing we are taking care of all your CFO services and needs; you will
be fully focused on pure business generation strategies.
ADVISORY SERVICES
-Strategic Planning
-Gross Profit Evaluation
-Increased Sales
-Integrated Performance Management
-Investment advisory services
-Tax advisory services
OUR BOARD
Good governance and leadership greatly determine the success of an organization. These are
essential throughout the changing phases of an organization's life. Heed Advisory Services
8
Limited is re-inforced with experienced team of leaders who contribute to its strong
foundation.
SAHEED OLADIRAN is a chartered accountant by profession and an associate of
Investment Advisers and Portfolio Managers. He is the Managing Director of Heed Advisory
Services Limited.
Saheed has over eleven (11) years working experience in various areas of accountancy and
finance such as financial reporting, debt management and collection, employees
compensation restructuring and strategic tax management in the financial services sector of
the economy before collaborating in the establishment of the HASL.
He has worked with Jeruti Industrial Services Limited as an accountant, Capital Bancorp
Limited as an accountant, Cornerstone Leasing & Investments Limited as Head, Finance &
Investments as well as Greenwich Trust Limited as Chief Financial Officer before his
resignation to steer the affairs of Heed Advisory Services Limited in June 2012.
Saheed, a year 2000 graduate of Accountancy & Finance with Upper credit division from
Yaba College of Technology, Yaba, Lagos has attended various trainings including:
2011 West Africa Regional Anti-Money Laundering/CFT Conference in Accra, Ghana
organized by Financial Intelligence Training Centre (FITC/GIABA);
Customers Service Excellence organized by Lagos Business School;
Accounting, Taxation and Legal Issues in Equipment Leasing organized by
Equipment Leasing Association of Nigeria (ELAN) ;
Seminar on Strategies for Managing and Collecting Debts at the Lagos Business
School of the Pan African University, Ajah- Lekki, Lagos.
DR. GAFAR AMOO- Dr. Amoo is a medical doctor and Board member of Heed Advisory
Services Limited. He is a Medical Officer with the General Hospital Igbo-Ora, Oyo State,
Nigeria. He was the winner of 2012 most active NCD Clinic in Oyo State by Strategy For
Improving Diabetics Care in Nigeria (SIDCAIN).
4.
.2
10
proposed engagement team on all future engagements We realize the investment our
clients make over time to help us better understand their organization, people and
goals. Like your investment in us we invest our people in you.
.3
Our team consists of technical experts in their respective fields. These include
International Financial Reporting Standards (IFRS), IFRS for SMEs, Nigerian-GAAP
and International Public Sector Accounting Standards (IPSAS) - used in the public
sector.
Our IFRS team are well vast in the adoption and implementation of IFRS in the
private and public sectors of the Nigerian economy in view of the training received
locally and internationally.
Our vast experience in offering public courses gives our attendees the opportunity to
have first-hand information and to be well-informed on the array of topics they are
being trained on.
These experts can deliver tailor-made training programs, provide formal accounting
opinions, provide accounting guidance and assist you in addressing your financial
reporting and accounting issues.
.4
5.
11
6.
Implementation of IFRS is required for all publicly listed entities and significant
public interest entities for financial year-ends on or after 31 December 2012.
Other public interest entities are expected to implement IFRS by 1 January 2013
7.
8.
12
A full audit trail for all adjustments from SAS - Nigerian GAAP to IFRS will
be required;
9.
10.
13
11.
SPECIFIC
Conversion benefit to our firm and our clients is principally, the globalisation of
financial statements.
It eases the consolidation of financial statements where a company has an off shore
branch.
It also facilitates the trading of local stocks in the International markets as the indices
and mode of determining the value of a company relying on the audited financial
statements are basically the same, globally.
It facilitates the current value of the company, since fair values of assets are used in
preparing the financial statements and making provision for impairment.
12.
SPECIFIC TOPICS
Accounting Changes
In April 2008 the Treasury announced the Trigger Points for the
implementation of IFRS that lead to the first set of IFRS compliant
accounts for the year ending 31 December 2012. IFRS shadow accounts
for 2010-11 will also be produced.
Management will need to ensure that it is able to produce financial
reporting information on an IFRS basis to feed into restated comparatives.
Until 31 December 2010 Management will also need to produce
information on the current local, entity-specific GAAP basis for their
2010-11 published financial statements.
14
.2
.3
15
A full audit trail for all adjustments from SAS - Nigerian GAAP to IFRS will
be required;
transition to IFRS. This increase in length was largely due to the need to provide
more explanation on application of the standards, but also due to the requirement to
explain areas of judgement and an indication of uncertainties in accounting
estimates.
The adoption of IFRS is an opportunity for your company to revisit its accounting
policies and ensure that it complies with the guidelines in all areas.
Question that shall be asked and answered is:
Is your company reviewing its accounting policies to conform with the
requirements of IFRS?
.4
.5
SUBSIDIARIES IAS 27
Are there relevant relationships which demonstrate the following factors that indicate
control and may, as a result, impact on the financial statements?
(Note one or more of these factors will be judged to indicate control and it is the
theoretical ability to control, not the exercise of it which is relevant)
16
ASSOCIATES IAS 28
Under IAS 28, investors must use the equity accounting method to account for all
Associates. Associates are classified as such if the investor has significant influence
over the investee, being the power to participate in the financial and operating policy
decisions of the investee but not control or joint control over those policies.
Are there relevant relationships which demonstrate the following that indicate
significant influence?
(Note As for control, one or more or these factors will indicate significant influence)
Representation on the board (greater than 20% of the voting power results in
significant influence).
Participation in the policy making process.
Material transactions with the investee.
Interchange of managerial personnel.
Provision of essential technical information.
Are there changes to the bodies which will be equity accounted as a result of the
transition to IFRS?
.7 JOINT VENTURES IAS 31
Joint ventures are defined in terms of a contractual arrangement, whereby two or
more parties undertake an economic activity that is subject to joint control.
Note IAS 31 only applies when decisions require unanimous consent. Three types of
joint ventures are identified, jointly controlled operations, jointly controlled assets
and jointly controlled entities.
What contractual arrangements whereby two or more parties undertake an activity
that is subject to joint control, and unanimous consent is required to take decisions,
exist?
If such arrangements exist then is the body accounting for them as follows, dependent
on the nature of the arrangement?
Jointly controlled operations:
17
Jointly controlled entities the venturer will need to apply one of the following
treatments:
Proportional consolidation.
The equity method of accounting for the entity.\
.8
.9
.10
Non-Current Assets
Background
The transition to IFRS with regard to non-current (fixed) assets will affect your
company. The International standards require some significant changes in accounting
treatment that will result in adjustments:
The standards that impact on the accounting for non-current assets are:
18
IAS 36 Impairment.
Note These standards do not apply to assets held for sale, biological agricultural
assets, exploration and evaluation assets, mineral rights and reserves, or investment
properties.
.11
.12
If your company is recognising and valuing non-property fixed assets at fair value, or
depreciated historic cost for assets with a short life or low value;
If your company is capitalising donated assets at fair value with the credit entry made
to the donated asset reserve;
If your company is capitalising subsequent expenditure when it is probable economic
benefits will flow and the costs can be measured reliably;
If the company is taking revaluation losses, first to reserves, then to the OCS for any
loss in excess of previous revaluation gains;
19
(Note We shall post donated assets to the donated asset reserve, grant financed to
government grant reserve).
If the companys non-current assets have a residual value;
Note - If so then this residual value, where material, must be revisited by us at every
reporting date with depreciation adjusted accordingly.
If the company values assets that have been purchased for non-monetary assets at fair
value;
.13
INTANGIBLE ASSETS
Question that we shall address is:
Is the company recognising intangible assets, when they are separately identifiable
from the business and meeting the criteria of IAS 38?
If your company is holding intangible assets at the appropriate values;
On first time adoption, IAS 38 allows entities to elect to used deemed cost for initial
recognition of the intangible asset where that asset meets the recognition criteria in
IAS 38 and the revaluation criteria. That deemed cost may be fair value, or cost or
depreciated replacement cost (DRC). Under IFRS 1 an entity can only elect to use
these routes if the intangible asset meets both recognition criteria in IAS 38, including
reliable measurement of original cost. Thus, an entity can only use retrospective
capitalisation where it holds reliable original cost information in relation to the
internally generated asset.
For subsequent measurement IAS 38 allows the use of either the cost or revaluation
model for each class of intangible asset.
Note Intangibles will have to be retrospectively valued at the date of adoption of
IFRS.
If your company is capitalising development costs (they shall be capitalised
under IAS 38). To do so, the management shall demonstrate the following:
20
the intention to complete the intangible asset and use or sell it;
how the intangible asset will generate probable future economic benefits.
Among other things, the entity can demonstrate the existence of a market for
the output of the intangible asset or the intangible asset itself or, if it is to be
used internally, the usefulness of the intangible asset;
DEBTORS
IAS 39 has one specific rule relating to bad debt provisions that may impact on the
government sector.
Is your company providing for specific bad debts (specifically stated in IAS 39)?
.15
LEASES
Background
IAS 17 is similar in many respects to Nigerian SAS, but the focus on the assessment
of the finance/operating lease split is based solely on the whether substantially all of
the risks and rewards of ownership of the asset have been transferred to the lessee.
In addition IAS 27 states that any land and building leases should be subject to
separate assessments for the land and building elements. This is likely to lead to more
buildings being included on public sector balance sheets.
IFRIC 4 extends the scope of the lease based accounting treatment beyond the legal
form or leases to lease type arrangements, which will increase the disclosure and
recognition requirements for some entities.
The following issues shall be addressed:
Following a review of material contracts, extensive changes are required to ensure
that the classification of operating/finance leases are correct;
The lease classification test is based on the balance of risk and rewards of ownership.
Indicators that a lease should be classified as a finance lease include:
21
The lease transfers ownership to the lessee at the end of the term.
The lease contains a bargain purchase option.
IFRIC 4 requires the recognition of a lease (finance or operating) together with the
appropriate disclosure. (Two criteria must be met: the arrangement must be based on
the right to use a specific asset; and the arrangement must contain a right to control
the use of an asset, for example an outsourcing arrangement or a telecoms contract
that provides the right to capacity/bandwidth). If the arrangement falls under the
scope of IFRIC 4 then the standard risk and rewards tests will need to be applied to
assess the operating/finance lease split as detailed above.
If your company is reviewing all finance leases for land and buildings;
Such leases will need to be revisited and reassessed using the above classifications as,
under IAS 17, land elements must be separated from buildings elements in combined
leases and classified as operating leases unless the land transfers to the lessee at the
end of the lease term.
If any of the companys leases include incentives such as rent free periods or
minimum incremental increases; If so, they shall be included in the classification
assessment and accounted for appropriately within the finance/operating lease;
If the company is disclosing operating lease payments on the basis of the year they are
paid rather than the year in which the commitment expires;
.16
.17
Finance lease:
Operating leases:
Recognise lease income in a straight line basis over the lease term.
22
Include the transaction expenses with the asset and depreciate in line with the
entities policy.
12.
SCOPE/COVERAGE
Prior to the start of the engagement we will schedule a meeting with management to
discuss possible issues, establish an overall liaison for the project and make
arrangements for workspace and other needs. Additionally, Management will be kept
up to date on the status of the project and required reports during the course of the
engagement.
In order to accomplish our IFRS objectives and meet your deadlines for delivery the
sequence and timing of our procedures are critical. We will provide ARCHITECTS
REGISTRATION COUNCIL OF NIGERIA (ARCON) with a detailed plan for the
project soon after being notified that we have been selected as your consultant.
As the project is on-going, the ARCHITECTS REGISTRATION COUNCIL OF
NIGERIA (ARCON) Finance and Accounts staff shall be carried along to understand
and implement independently the IFRS.
With the on-the-job training, they shall be able to catch up quickly during the training
at the end of the exercise.
23
13.
DELIVERABLES
DELIVERABLES INCLUDE:
Organisational Readiness
Training
Delivery of Training
Implementations
Follow-up on implementation
14.
PROJECT STAFFING
OUR TEAM
Managing
Partner
IFRS
Technical
Partner
24
IFRS Training
Partner
Managers
Managers
Supervisors
Supervisors
15.
Seminar on Strategies for Managing and Collecting Debts at the Lagos Business
School of the Pan African University, Ajah- Lekki, Lagos.
DR. GAFAR AMOO- Dr. Amoo is a medical doctor and Board member of Heed Advisory
Services Limited. He is a Medical Officer with the General Hospital Igbo-Ora, Oyo State,
26
Nigeria. He was the winner of 2012 most active NCD Clinic in Oyo State by Strategy For
Improving Diabetics Care in Nigeria (SIDCAIN).
16.
PROJECT ASSISSTANCE
The Project may, inter alia, require the following from Architects Registration Council
of Nigeria (ARCON) (vis--vis Financial, Operational, Information Technology and
other relevant Systems):
Prompt provision of information and answers to our enquiries
The availability of documents and records as and when needed.
RESOURCES AND KNOWLEDGE AS UNDERSTOOD BY MANAGEMENT:
27
Key impacts on the organisation and its financial reporting arising from the
implementation of IFRS.
Key changes to accounting policies.
Level of resource required to successfully manage the transition.
IFRS staff training required.
Note Consideration should be given to training finance and non-finance staff
(such as procurement staff and business managers) in the impacts of IFRS.
Actions required to ensure that subsidiaries that are consolidated into the financial
statements will successfully implement IFRS.
Role of internal audit have in aiding the transition.
The potential impact on the accounts preparation timetable as a result of the
transition to IFRS.
Plan to keep the Management informed of the timetable and progress being made
towards adoption of the revised standards.
Potential budgetary impact of the move to IFRS.
How and when the engagement with the external auditor will take place.
Will the 2011 Accounts include a statement on preparedness and the potential
impact of the transition to IFRS?
Note Areas such as leases, financial instruments and fixed assets may require
additional data capture.
17.
TOOLS
To facilitate our work, ARCHITECTS REGISTRATION COUNCIL OF NIGERIA (ARCON)
should provide us with access to the computer system, avail us with passwords to be able to
assess the data/information in the computer system.
Avail us with both office and hotel accommodation facilities.
Provide means of transportation as we shall be required to move from one place to the other.
Sensitise the staff to co-operate with us as we shall be asking question and also be liaising
with them.
18.
19.
28
2 on Share Based Payment; and IAS 12 on Income Taxes. IFRS 2 and IAS 12 will not
apply to the public sector in general, but the other standards will be applied, which
will result in significant impacts for some organisations.
The key lessons from the private sector transition to IFRS are as follows:
The level of disclosure required under IFRS and therefore the length of
accounts, increased significantly as a result of the transition and the new
standards;
For most organisations the impact assessment and understanding of the new
standards took considerably longer than was expected;
19.
Flagging up and discussing key issues and potential areas of difficulty with
key stakeholders early aided smooth transition;
Board and Audit Committee engagement is crucial, to ensure that they are
involved in the project and aware of the areas of impact and the potential risks
involved in the transition.
29
1,200,000
60,000
200,000
1,460,000
30
WORK PLAN
Conversion
of
opening balances as
at 1 January 2012 to
IFRS
AVERAGE NUMBER
OF HOURS
16 hrs
31
32
Incorporation of
opening balances as at
1 January, 2013
Implementation
33
8 hrs
20 hrs
32 hrs
46 hrs
Post
implementation
34
24 hrs
Investment
property-IAS 40
PROGRAMME
Ensure that PPE are recognised with its initial costs and
included in the financial statements at carrying
amount. The costs to include purchase price,
handling cost, installation cost, import duties, etc
and less trade discounts or rebate
Ensure that the depreciation rates are determined by
the economic useful life of the assets.
Identify assets to be regarded as investment property
i.e. held in order to earn rentals and/or for capital
appreciation
Identify the accounting for investment property
Ensure appropriate recognition and measurement of the
Investment property
Ensure adequate treatment for gain or loss on disposal.
Ensure that owner occupied property or property held
on sale are not included.
Ensure that derecognition is carried out when the
investment properly is permanently withdrawn from
use and no future economic benefits are expected
from its disposal
Leases-IAS 17
Inventories- IAS 2
35
as the cost.
36
PROGRAMME
Insurance Contract1FRS 4
37
Recognise & separate non current assets held for sale and
discontinued operation from other assets.
Ensure that these non current assets are not depreciated
Ensure appropriate disclosures and measurement
38