Towards A Common Financial Reporting And Financial Accounting Systems Framework For Nigerian Banks

As the banking reforms in Nigeria progress from one stage on to another, each new situation presents its own challenges. While some likely fallout of the reforms can be forecasted with certainty, others emerge with the passage of time. The 31st December 2009 common year-end has become a reality. The banks have forwarded their draft financials to the CBN. The CBN needs to confirm the integrity and completeness of the financial reports before approving them. This presents yet another series of challenges for the Regulator as this time around, their can be no excuses.

One of the reasons advanced for the crises in some Nigerian banks had to do with inaccurate financial reporting. It was adduced that some loss-making financial institutions not only declared profits but paid dividends using depositor funds. The multiplier effect of such actions on the future financials of a firm/bank is at most imaginable. With the common year-end and the adoption of International Financial Reporting Standards, a golden opportunity has arisen for the CBN to rectify these anomalies.

First and foremost, it is important that banks send in their reports using a common financial reporting system framework. This will facilitate the comparison of a banks' financial performance over time and against that of other banks and the industry itself. The risk-based assessment of financial reports is thus simplified. It might be necessary for the CBN to further improve the quality of banks' financial reporting beyond what already exists.

Secondly, it is vital that the 'target examination' of the banks being carried out by the CBN in this wake does NOT simply focus on ascertaining data integrity. There is absolute need to also focus on each banks' financial system integrity. While recalling the popular phrase of 'Garbage In, Garbage Out', data integrity mainly focuses on data accuracy and completeness while financial system integrity focuses beyond data to all the other key elements of the financial information structure. Financial system integrity is definitely more holistic and reliable. To this end, a set of parameters for ascertaining system integrity might be required. The financial regulator must avoid a situation of garbage in garbage out of financial data, as that will fundamentally make inaccurate any information derived from the use of such data.

In addition to the above, perhaps it is also time for the introduction of a common financial accounting system framework for Nigerian banks. The framework should recommend the basic foundations or elements on which the entire financial accounting infrastructure of all banks should be based. This no doubt will take into consideration the nature of banking services in Nigeria. Recommendations for the scope of the charts of accounts, account classifications, internal control systems, financial accounting software, operating procedures/manuals and the likes should be paramount in this objective. Most of all, it is important that the whole system is simplified.

The Nigerian Government intervention which resulted in the injection of six hundred and twenty (620) billion Naira banking stimulus package is no doubt unprecedented. But the real challenge has to do with the implementation of the other remedial measures required to put the financial industry back on the path of recovery, growth and stability. Some of the above recommendations may represent necessary regulatory innovations. While some may argue that such measures will make the industry much more sophisticated, it is vital to note that if simplicity is considered as a guiding principle of the banking reform measures, complications are consequently eliminated.

How To Study Financial Accounting At A Classroom

First - Accounting is not a hard subject to study, and is easy to learn. The major secret to studying accounting is remembering that it is a cumulative study subject based on the first few chapters. Each chapter builds on the previously learned concepts and procedures. The accounting course is organized so that you study the most fundamental and essential concepts and procedures first, then you will be required to build on these concepts and procedures. To study accounting, you must master the first five chapters. These few chapters are the basis for the next chapters. When students run into difficulty, it is generally because they have either forgotten the earlier material or have not study it well enough to move forward.

Second- You need to ask questions from me what topics are important?, why they are important?, and how to use them?. Copying notes from others may not always show you the what, why and how.

Third -Arrive at your classroom a few minutes early. Choose a seat where you can comfort and be heard. Don't be afraid to ask or respond to questions. Try to overcome your shyness doubt. Commit yourself to ask or answer questions in class. Remember someone else in the class is probably wondering about the same thing.

Forth - You need to understand both the reasons and the mechanic of financial accounting. Memorizing information will hurt you later on in the course.

Fifth - A recent study indicated that you will remember 10% to 15% of what was said in class. However, if you write it down, your retention rate increases to 85%. Note taking is essential to learning accounting. You must learn to take notes efficiently, accurately, and quickly so you will not jeopardize your ability to listen effectively.

Sixth - Exchange telephone numbers or email id with at least two classmates. Make arrangements to study with these friends on a regular basis(group studies). Working in groups has benefits. These benefits include increasing your knowledge of accounting and improving your critical thinking and communication skills. If you are able to explain and demonstrate (verbalize) the learning objective to other group members, then you really understand the concepts. Don't be afraid to change study groups if you are unhappy with your original group. Finally, don't allow you study group turn into a gossip group, stick to your accounting.

Seventh - Before going to class review the textbook, study guide, homework assignment, and class notes. Make a list of questions you have to ask teacher. Writing out your questions makes it easier for you to ask teacher in class.

Eighth - Waiting until the last minute does not give you the opportunity to completely understand the learning objectives. If you have completed your homework and are able to verbalize the learning objectives to other members in your study group, then you will do well on the test. If however, you are trying to complete the reading and homework assignments the night before the examination, you will be unprepared.

FBAR: Foreign Bank (and Financial) Account Reporting Rules Expanded With Higher Penalties

The U.S. Treasury issued expanded rules, effective March 28, 2011, requiring U.S. persons to report foreign bank and financial accounts each year. The new rules apply to every U.S. citizen or resident and every entity organized under U.S. law. They must report every foreign account over which he, she, or it has signature authority and every foreign account in which he, she, or it has a financial interest. The reports on Form TD F 90-22.1 must be received by June 30 by the IRS at an address in Detroit, MI. Penalties under the new rules can be the highest balance in the account, up to $25,000 each, and may include criminal penalties (jail time) for willful failures.

Who Must File. The reports must be filed by every U.S. person with a financial interest in or signature authority over a foreign financial account. This includes all citizens and residents of the United States. It also includes all entities formed under the laws of the United States. For this purpose, United States includes the 50 states, District of Columbia, Puerto Rico, the Virgin Islands, and other territories and possessions. The rules require reports by corporations, partnerships, limited liability companies, and other entities, no matter who owns them, if they were formed under U.S. law. In addition, U.S. persons (individuals or entities) that own more than 50% of the vote, value, interest in profits, or capital of any entity with a foreign account must also file, whether the entity is U.S. or foreign.

U.S. persons must report all foreign accounts they own, either separately or jointly. They must report if they are the owner of record, or if another person is the owner of record acting as their agent. In addition, a U.S. person must report an account owned by:

    Any corporation in which the person owns over 50% of the vote or value,
    Any partnership in which the person owns over 50% of the capital or profits interests,
    Any other entity, including an LLC, in which the person owns over 50% of the vote, value, equity, assets, or profits, and
    Any trust of which the person is either the grantor or 50% or more income beneficiary.

Example: John and Mary are unrelated. John owns 51% and Mary owns 49% of JM, a Delaware LLC. JM owns 51% of a Clocks GmgH, a German company. Clocks has an operating bank account at a bank in Frankfurt and a brokerage account with a stock broker in Zurich. John and JM must both report each account. Mary can direct the brokerage to make distributions, but can't sign any checks. Mary must report the brokerage account.

In addition, a person who has signature authority over an account must report the account. Signature authority includes any ability to direct the institution. Example: Fred is a U.S. citizen living in Germany, and is the controller at Clocks. He can sign the Clocks checks, with one co-signer. Fred must report the Frankfurt account.

What Accounts Must Be Reported. Accounts with a foreign branch of any bank, brokerage, or other financial services company must be reported. All of the following must be reported:

    Checking accounts
    Savings accounts
    Brokerage accounts
    Mutual funds with regular net asset value determinations
    Life insurance policies or annuities with a face value

A few exceptions apply. A bank account maintained on a U.S. military base is not considered foreign. Accounts in Puerto Rico, Virgin Islands or other possessions are not considered foreign. Beneficiaries of IRAs do not themselves report accounts maintained by the IRA.

Examples: Jesus is a resident of Puerto Rico. He does not need to report his Puerto Rico bank account, but must report his account in Haiti.

Betty lives in Idaho. She has a whole life insurance policy with Insur AG, a Swiss insurance company. She must report that policy.

Alice lives in Texas. She owns shares of a German mutual fund held for her benefit in her family attorney's name. Alice and the attorney must both report the mutual fund.

Account Value. Reporting is required for every U.S. person who has accounts with an aggregate value in excess of $10,000 at any time during the year. The value of each account is determined by translating the face value of the account to U.S. dollars using the rate for the end of the year as published by Treasury. Where no rate is published, an alternative source may be used (but must be explained).

Example: Harry has a bank account in Elbonia denominated in Drakmas. The maximum value of the account during the year was 1,427,000 Drakmas on June 13, 2010, and nearly zero the rest of the year. Treasury did not publish rates for the Drakma, but the Elbonian Gazette listed the rate on June 13 as $1 = 150 Drakmas, and the rate on December 31 as $1 = 130 Drakma. Harry must report the account at a value of $10,977, and attach an explanation to the form about using the Gazette rate.