27, January 2025
Thank you for reading this post, don't forget to subscribe!The Financial Reporting Council, FRC, has explained that Nigeria has not gotten to the point of hyperinflationary economy, adding that International Accounting Standards, IAS 29, is not necessary in 2024 financial statements preparation.
The Council, in a press statement signed by its Executive Secretary/Chief Executive Officer, Dr. Rabiu Olowo, noted that IAS 29 which borders on Financial Reporting in Hyperinflationary Economies should not be applied in the preparation of financial statements for the 2024 financial year.
According to Olowo, “Determining hyperinflation requires significant judgment and consideration of all relevant indicators. After thorough analysis of the above indicators, the FRC concludes that Nigeria is not yet a hyperinflationary economy. Therefore, IAS 29 should not be applied in the preparation of financial statements for the 2024 financial year. The FRC will continue to monitor economic developments and update this position when necessary.”
He explained: “The FRC has extensively engaged various stakeholders such as the Professional Accounting Bodies in Nigeria, external auditors, government regulatory agencies, and significant public interest entities, where an objective evaluation of the five indicators of the economic environment of a country as stipulated in IAS 29: Financial Reporting in Hyperinflationary Economies were undertaken especially to determine the relevance and applicability of the standard in Nigeria in light of the inflationary trend in the country.”
The FRC’s analysis of these indicators for Nigeria was that, “the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency are immediately invested to maintain purchasing power:
“Data shows that Nigerians continue to transact in local currency and invest in Naira-denominated assets, indicating confidence in the local currency. There is no indication that the general population prefers to keep its wealth in non-monetary assets or in any other relatively stable foreign currency.
Data from the Central Bank of Nigeria (CBN) and the financial statements of Nigerian financial institutions continue to show that investment in monetary assets such as treasury bills, mutual funds, fixed and current deposits and other short-term monetary assets have been increasing over the last three years.
“Data from the National Pension Commission shows that the Nigerian pension assets which are predominantly held in monetary assets have also continued to increase. The pension assets totaled N22.25 trillion as at November 2024 compared to N18.35 trillion as at December 2023. The currency in which most of these non-monetary assets is denominated is in the Naira. There is no rejection of the local currency as a medium of exchange in Nigeria as the Naira still serves as its base currency for all transactions.”
(www.naija247news.com)
