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Experts advocate for good financial reporting

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By Abiodun Okunloye

Enhanced Valuation is essential to achieve the ₦1 trillion economy goal by 2030.

During a recent valuation seminar co-hosted by BusinessDay and Diya Fatimilehin, financial analysts emphasized that the implementation of accurate valuation standards has the potential to improve financial reporting for companies operating in Nigeria. Additionally, this improvement could also play a role in increasing foreign investments in both Nigeria and internationally. The event focuses on highlighting the significance of valuation standards in Nigeria and how they contribute to the country’s economy.

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Establishing strong valuation standards is essential for the success of the ₦1 trillion Economy goal by 2030, as highlighted by Gboyega Fatimilehin, one of the founding partners at Diya Fatimilehin. This is due to the significant link between valuation practices and global interconnectedness in business. Correctly valuing assets and providing precise financial reports are crucial for drawing investments from both local and foreign sources into the Nigerian economy, ultimately establishing trust in the accuracy of financial information.

Stakeholders are working together to establish valuation standards.

Asset valuation standards are crucial for stakeholders to have a clear understanding of a company’s assets and their financial impact. This transparency and reliability aid in making informed decisions, as stated by Rabiu Olowo, CEO of the Financial Reporting Council. Ugochukwu Obu Nwora, who represented him, emphasized that adherence to these standards provides Investors with the confidence they need to make precise decisions. Before making any Investment decisions, investors heavily depend on the accuracy of financial reports.

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Making a wrong decision due to inaccurate information can have a significant impact on their assets. He mentioned that a team of experts from various groups is working together to establish valuation standards in Nigeria, with the goal of releasing them by the end of August 2024. During a further discussion, Chris Thorne, who is the director of Valuology, emphasized the significance of valuation in providing crucial insights for business decisions and ensuring financial stability.

Investors should trust the sector’s method of delivery.

Thorne stressed the importance of proper valuation standards in reporting and highlighted the need for clear guidelines in developing theoretical transactions, noting that these guidelines do not need to be uniform. He emphasized the importance of investors having faith in and comprehending the method of delivery. He emphasized the importance of re-evaluating markets in light of recent fluctuations in interest rates and exchange rates globally. While there is no one-size-fits-all valuation method, it is crucial for valuers to grasp the dynamics of their market and factor in the associated risks.

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In the panel discussion, Jamiu Olakinsan emphasized the importance of following best practices to guarantee that the revaluation leads to precise reporting. He mentioned that the valuation report is a crucial factor in the company’s financial reporting process. The focal points of financial reporting pertaining to tangible assets include categorizing them into property, plant, and equipment, which does not require them to be valued at fair market value, and investment properties acquired for either capital growth or rental income.

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Moreover, He stressed the significance of transparently disclosing the valuation methods employed in financial reporting, such as the market, income, or cost approach. Previous government efforts have encompassed the formation of regulatory bodies like the Financial Reporting Council of Nigeria (FRC), tasked with supervising the adherence to financial reporting standards. The FRC has played a crucial role in promoting changes and laying the groundwork for the current focus on valuation standards. The ongoing reforms undertaken by the other associations also work hand in hand with efforts to enhance the stability and resilience of the financial sector.

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