By Babajide Komolafe
A financial expert has cautioned banks against express conversion to International Financial Reporting System (IFRS).

“Express conversion to IFRS is a waste”, said Mr. Ayo Othihiwa, Partner, KPMG Professional Services.

IFRS is a set of accounting standards developed by an independent, not-for-profit organization called the International Accounting Standards Board (IASB). The goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements.

The aim of IFRS is to provide a single set of high quality, global accounting standards that require transparent and comparable information in general purpose financial statements.

Banks in Nigeria are required to adopt IFRS by end of this year. Three banks namely GTBank, Access Bank and FirstBank have adopted the new standard.

Speaking,   at a banking industry  IFRS seminar  on Monday, Othihiwa advised banks to adopt a phased approach in their bid to convert to the new reporting standard.

He said that conversion to IFRS  has profound impact on the entire organisation and hence there is need for banks to be approach conversation cautiously  and systematically. He said in their bid to convert, banks will have to confront with issues and challenges of asset classification, recognition of assets and measurement issues.

These issues, he noted boils down to issues of valuation and accounting.
To navigate the challenges, he recommended three phase approach to banks.  In the first phase, banks should assess impact of conversion to IFRS and plan for the conversion, while in the second phase they should learn and build the tools necessary for implementation of the conversion plan, and the third phase is the roll out of the conversion plan.

He stressed that IFRS is all about fair value principle, which requires financial statements be based on present value of assets.

Presently, the  Central Bank of Nigeria (CBN), ministries of Finance and Commerce and Industry and the Nigerian Accounting Standards Board (NASB) are currently working together to integrate the country’s financial reporting into the mainstream of the global model by adopting the International Financial Reporting Standards (IFRS).