This study compared loan loss provisioning under International Financial Reporting Standards (IFRS) and Nigerian Prudential Guidelines using data from four major Nigerian banks for the 2012 year. The results showed that in all cases, loan loss provisions calculated under the Prudential Guidelines were higher than provisions calculated under IFRS. Specifically, the differences between the two calculations ranged from 5.9% to 13.3% of reported profits. This indicates that the Prudential Guidelines approach leads to more conservative reported profit figures through higher loan loss provisions compared to IFRS. The study provides early evidence on the differences between IFRS and Prudential Guidelines approaches in the Nigerian banking sector.
An Understanding Of Financial Communications And Investor RelationsMSL
This presentation is by MSLGROUP thought leader Jaideep Shergill, head of our financial communications in Asia and CEO, Hanmer MSL.
Hanmer MSL is one of India’s largest multi-discipline communications firms and a leader in the area of speciality communications services, including strategic public relations, financial communications, social media, events, activation and creative services. It is part of MSLGROUP, Publicis Groupe's flagship strategic communications and engagement network.
This presentation offers an in-depth understanding of financial communications and investor relations.
Factors Affecting Return on Assets (ROA) in Banking Companies Listed in Indon...AJSSMTJournal
Bank performance is a description of each economic results can be achieved by the banking company in a
particular period through the activities of the company to generate profits effectively and efficiently. The performance level
was good bank increase public confidence to use the financial services of banks. One indicator to assess the financial
performance of a bank is ROA. The purpose of this research is to analyze the effect of CAR, NPL, LDR, NIM, BOPO, Inflation,
and BI Rate on ROA of banking companies listed on the Stock Exchange partially and simultaneously. The analysis method
used is Multiple Linear Regression Analysis, which is processed using the SPSS program version 25. The results showed that
partially CAR, NPL, Inflation, and BI Rate did not significantly influence ROA of banking companies listed on the IDX, while
LDR, NIM and BOPO significantly influence ROA on banking companies listed on the IDX. Simultaneously all independent
variables have a significant effect on ROA in banking companies listed on the IDX, where the contribution of all independent
variables is 95.80% and the remaining 4.20% influenced by other variables that have not been examined in this research.
An Understanding Of Financial Communications And Investor RelationsMSL
This presentation is by MSLGROUP thought leader Jaideep Shergill, head of our financial communications in Asia and CEO, Hanmer MSL.
Hanmer MSL is one of India’s largest multi-discipline communications firms and a leader in the area of speciality communications services, including strategic public relations, financial communications, social media, events, activation and creative services. It is part of MSLGROUP, Publicis Groupe's flagship strategic communications and engagement network.
This presentation offers an in-depth understanding of financial communications and investor relations.
Factors Affecting Return on Assets (ROA) in Banking Companies Listed in Indon...AJSSMTJournal
Bank performance is a description of each economic results can be achieved by the banking company in a
particular period through the activities of the company to generate profits effectively and efficiently. The performance level
was good bank increase public confidence to use the financial services of banks. One indicator to assess the financial
performance of a bank is ROA. The purpose of this research is to analyze the effect of CAR, NPL, LDR, NIM, BOPO, Inflation,
and BI Rate on ROA of banking companies listed on the Stock Exchange partially and simultaneously. The analysis method
used is Multiple Linear Regression Analysis, which is processed using the SPSS program version 25. The results showed that
partially CAR, NPL, Inflation, and BI Rate did not significantly influence ROA of banking companies listed on the IDX, while
LDR, NIM and BOPO significantly influence ROA on banking companies listed on the IDX. Simultaneously all independent
variables have a significant effect on ROA in banking companies listed on the IDX, where the contribution of all independent
variables is 95.80% and the remaining 4.20% influenced by other variables that have not been examined in this research.
Evaluating Loan Loss Provisioning for Non-Performing Loans and Its Impact on ...Fakir Tajul Islam
Using the aggregate data of 56 commercial banks in the last 9 years
(2009-2017), this study attempts to evaluate the Impacts of LLP maintained for NPLs on profitability, as it may help
to take the level of the LLP, and NPLs in the optimum level of business success.
Mercer Capital | The Ins and Outs of Business Development CompaniesMercer Capital
With more than thirty five public registrants reporting nearly $40 billion of assets under management, business development companies, or BDCs, are increasingly important financial intermediaries, matching a wide variety of businesses needing capital with yield-hungry investors eager to provide it.
Compared to private equity funds, BDCs have historically garnered less media and investor awareness, although the persistent low yield environment has helped to raise the profile of BDCs. Like private equity funds, BDCs invest in a portfolio of generally illiquid securities of privately held companies. Unlike private equity funds, which are structured as finite-lived investment partnerships, BDCs are publicly traded vehicles accessible to retail investors, providing permanent capital for investment. As long as certain distribution requirements are met, BDCs are not subject to income tax. Like any other publicly traded company, a BDC must file quarterly and annual reports with the SEC. These reports provide a window into the trends and economic factors influencing the broader universe of investors providing debt and equity capital to middle market companies.
The purpose of this whitepaper is to review the principal financial statement components of BDCs with a view to clarifying the factors that are most likely to influence financial performance.
Econometrics Analysis of Capital Adequacy Ratios and the Impact on Profitabil...iosrjce
This paper examines the econometrics analysis of capital adequacy ratios and the impact on the
profitability of Commercial Banks in Nigeria from 1980 – 2013. The objective is to investigate whether there is
a dynamic long run relationship between capital adequacy ratios and the profitability of commercial banks.
Time series data were sourced from Stock Exchange factbook and financial statement of quoted commercial
banks and the Johansen co-integration techniques in vector error correction model setting (VECM) as well as
the granger causality test were employed. The study has Return on Asset (ROA), Return on Investment (ROI)
and Return on Equity (ROE) as the dependent variables and the independent variables are Adjusted Capital to
Risk Asset Ratio (ACRR), Capital to Deposit Ratio (CTD), Capital to Net Loans and Advances Ratio (CNLAR),
Capital to Risk Asset Ratio (CRA) and Capital to Total Asset Ratio (CTAR). The empirical result demonstrated
vividly in the models that there is a positive long run dynamic and significant relationship between return on
asset and capital to risk asset ratio and capital to deposit ratio while others are negatively correlated. The
findings also revealed that there is bi-directional causality running from ROA to ACRR and ROA to CNLAR. We
therefore recommend that financial policies should be strengthened to deepen the capital base of Nigerian
Commercial banks to enhance bank profitability and sustain economic growth.
IFRS9; the challenges mortgage portfolio owners faceHML Ltd
IFRS9 is a new accounting standard that will affect European and UK mortgage lenders and Special Purpose Vehicles (SPVs) from January 2018. It will replace IAS39.
The challenge for lenders and SPVs
• Historic data will be required to carry out the new calculations
• New systems, scorecards and processes will need to be developed
• There could be a 50% increase in impairment charges as a result of IFRS9 – and potentially more (Deloitte survey, 2014)
• IFRS9 requires constant monitoring and reporting
• Your people may need to be upskilled
Econometrics Analysis of Capital Adequacy Ratios and the Impact on Profitabil...iosrjce
IOSR Journal of Economics and Finance (IOSR-JEF) discourages theoretical articles that are limited to axiomatics or that discuss minor variations of familiar models. Similarly, IOSR-JEF has little interest in empirical papers that do not explain the model's theoretical foundations or that exhausts themselves in applying a new or established technique (such as cointegration) to another data set without providing very good reasons why this research is important.
Effect of Financial Reporting Quality on Corporate Performance Evidence from ...YogeshIJTSRD
This study determined the relationship between discretionary accruals, non discretionary accruals, on return on investment. Data for this study were obtained from secondary sources only. The study adopted an ex post facto research design. The secondary data were obtained from annual reports of 22 listed banks in Nigeria Stock Exchange. The sample banks were obtained using the stratified sampling technique while the sample size was obtained using the random sampling technique. The variables that were considered in this study are financial reporting quality and corporate performance, which were represented by the effect of discretionary accruals, and non discretionary accruals on return on investment. Data analyses were carried out using Ordinary Least Square statistical tools with aid of E view 9 and the level of significance used to test the hypothesis was 5 . The findings show that there is negative but significant relationship between discretionary accruals, non discretionary accruals and return on investment. Based on the findings, the study recommended that management of listed banks should ensure that they adopt best practices in financial reporting like Automated financial reporting solutions because there is direct relationship between abnormal accruals and return on investment. Anichukwu, Salome A | Ekwueme, Chizoba M "Effect of Financial Reporting Quality on Corporate Performance: Evidence from Listed Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-3 , April 2021, URL: https://www.ijtsrd.com/papers/ijtsrd39835.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/39835/effect-of-financial-reporting-quality-on-corporate-performance-evidence-from-listed-banks-in-nigeria/anichukwu-salome-a
Evaluating Loan Loss Provisioning for Non-Performing Loans and Its Impact on ...Fakir Tajul Islam
Using the aggregate data of 56 commercial banks in the last 9 years
(2009-2017), this study attempts to evaluate the Impacts of LLP maintained for NPLs on profitability, as it may help
to take the level of the LLP, and NPLs in the optimum level of business success.
Mercer Capital | The Ins and Outs of Business Development CompaniesMercer Capital
With more than thirty five public registrants reporting nearly $40 billion of assets under management, business development companies, or BDCs, are increasingly important financial intermediaries, matching a wide variety of businesses needing capital with yield-hungry investors eager to provide it.
Compared to private equity funds, BDCs have historically garnered less media and investor awareness, although the persistent low yield environment has helped to raise the profile of BDCs. Like private equity funds, BDCs invest in a portfolio of generally illiquid securities of privately held companies. Unlike private equity funds, which are structured as finite-lived investment partnerships, BDCs are publicly traded vehicles accessible to retail investors, providing permanent capital for investment. As long as certain distribution requirements are met, BDCs are not subject to income tax. Like any other publicly traded company, a BDC must file quarterly and annual reports with the SEC. These reports provide a window into the trends and economic factors influencing the broader universe of investors providing debt and equity capital to middle market companies.
The purpose of this whitepaper is to review the principal financial statement components of BDCs with a view to clarifying the factors that are most likely to influence financial performance.
Econometrics Analysis of Capital Adequacy Ratios and the Impact on Profitabil...iosrjce
This paper examines the econometrics analysis of capital adequacy ratios and the impact on the
profitability of Commercial Banks in Nigeria from 1980 – 2013. The objective is to investigate whether there is
a dynamic long run relationship between capital adequacy ratios and the profitability of commercial banks.
Time series data were sourced from Stock Exchange factbook and financial statement of quoted commercial
banks and the Johansen co-integration techniques in vector error correction model setting (VECM) as well as
the granger causality test were employed. The study has Return on Asset (ROA), Return on Investment (ROI)
and Return on Equity (ROE) as the dependent variables and the independent variables are Adjusted Capital to
Risk Asset Ratio (ACRR), Capital to Deposit Ratio (CTD), Capital to Net Loans and Advances Ratio (CNLAR),
Capital to Risk Asset Ratio (CRA) and Capital to Total Asset Ratio (CTAR). The empirical result demonstrated
vividly in the models that there is a positive long run dynamic and significant relationship between return on
asset and capital to risk asset ratio and capital to deposit ratio while others are negatively correlated. The
findings also revealed that there is bi-directional causality running from ROA to ACRR and ROA to CNLAR. We
therefore recommend that financial policies should be strengthened to deepen the capital base of Nigerian
Commercial banks to enhance bank profitability and sustain economic growth.
IFRS9; the challenges mortgage portfolio owners faceHML Ltd
IFRS9 is a new accounting standard that will affect European and UK mortgage lenders and Special Purpose Vehicles (SPVs) from January 2018. It will replace IAS39.
The challenge for lenders and SPVs
• Historic data will be required to carry out the new calculations
• New systems, scorecards and processes will need to be developed
• There could be a 50% increase in impairment charges as a result of IFRS9 – and potentially more (Deloitte survey, 2014)
• IFRS9 requires constant monitoring and reporting
• Your people may need to be upskilled
Econometrics Analysis of Capital Adequacy Ratios and the Impact on Profitabil...iosrjce
IOSR Journal of Economics and Finance (IOSR-JEF) discourages theoretical articles that are limited to axiomatics or that discuss minor variations of familiar models. Similarly, IOSR-JEF has little interest in empirical papers that do not explain the model's theoretical foundations or that exhausts themselves in applying a new or established technique (such as cointegration) to another data set without providing very good reasons why this research is important.
Effect of Financial Reporting Quality on Corporate Performance Evidence from ...YogeshIJTSRD
This study determined the relationship between discretionary accruals, non discretionary accruals, on return on investment. Data for this study were obtained from secondary sources only. The study adopted an ex post facto research design. The secondary data were obtained from annual reports of 22 listed banks in Nigeria Stock Exchange. The sample banks were obtained using the stratified sampling technique while the sample size was obtained using the random sampling technique. The variables that were considered in this study are financial reporting quality and corporate performance, which were represented by the effect of discretionary accruals, and non discretionary accruals on return on investment. Data analyses were carried out using Ordinary Least Square statistical tools with aid of E view 9 and the level of significance used to test the hypothesis was 5 . The findings show that there is negative but significant relationship between discretionary accruals, non discretionary accruals and return on investment. Based on the findings, the study recommended that management of listed banks should ensure that they adopt best practices in financial reporting like Automated financial reporting solutions because there is direct relationship between abnormal accruals and return on investment. Anichukwu, Salome A | Ekwueme, Chizoba M "Effect of Financial Reporting Quality on Corporate Performance: Evidence from Listed Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-3 , April 2021, URL: https://www.ijtsrd.com/papers/ijtsrd39835.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/39835/effect-of-financial-reporting-quality-on-corporate-performance-evidence-from-listed-banks-in-nigeria/anichukwu-salome-a
Banks appear to have incentives for manipulating provisions estimate. Banks use loan loss provisions to smooth income, manage regulatory capital and to signal private information to investors. Empirical evidence in banking research report mixed conclusion as to whether regulation (IFRS or Basel) hinders or encourages this behaviour. This paper provide evidence that, the presence of regulation, motivates banks to smooth income possibly as a preferred earnings management technique. The findings of this paper are relevant
to current concerns of accounting standard setters and bank regulators on the current model of loan loss provisioning.
Regulations are integral to the banking industry, and the extent to which the bank complies with such regulations not just maintains its bottom line in terms of avoiding hefty fines, but also has a big bearing on credibility and integrity. So how do banks comply with all that is required, and save themselves from the ill-effects of non-compliance?
Aptivaa is pleased to launch a series of blogs to apprise readers of some of the key aspects related mostly to Impairment Modeling, for compliance with the new accounting standards (IFRS 9), as well as to have a conversation with the readers about the challenges that banks are facing in their implementation efforts
Aptivaa is pleased to launch a series of blogs to apprise readers of some of the key aspects related mostly to Impairment Modeling, for compliance with the new accounting standards (IFRS 9), as well as to have a conversation with the readers about the challenges that banks are facing in their implementation efforts.
Looking back in time for benchmarking - developing countriesSokrates advisors
Due diligence benchmarks often involve the identification of reasonably similar situations in the past to compare and evaluate future outcomes. An application to telecom due diligence in developing countries in general and sub-Saharan Africa in particular.
6.3 Substance over form is a recipe for failing to achieve compar.docxalinainglis
6.3 “Substance over form is a recipe for failing to achieve comparability between financial statements of different enterprises.” Discuss.
ANSWER 1:
Substance over form is an accounting principle, which ensures the relevant and true picture of the transactions in the financial statements of the entity. It is an accounting concept, where items are accounted according to their economic reality and substance, rather than focusing merely on the legal aspects of transactions. The key point is to highlight the transactions should not be recorded in order to hide the intention behind the transaction.
However, this recipe fails to compare the financial statements of different enterprises, as in some cases, it is difficult to identify the intent behind the transaction and the substance linked to the transaction, hence the difference, in how to present the transaction can lead to various results. For example: For a company, say X, the intent over creation of an asset or a liability is not identified, based on the benefits and obligations attached to it. Hence, a problem arises, which gives different results in different situations.
ANSWER 2:
Financial information is irrelevant unless it can be compared across periods and companies. This requires that any changes should be disclosed.
It is important that financial statements released by enterprises have similar and consistent form. It is not just about what numbers you have on the statements, but also how the statements are constructed.
6.4 Explain why it is necessary to define either “asset” or “expense” from first principles, but not both. Why has the IASB chosen to define the former?
It is important to define either asset or expense from first principles because you must understand weather to use the matching concept ort the revenue principle. The IASB chooses to use the second way of defining the elements because it has the effect of reducing the importance of the matching concept.
6.5 Is it necessary and useful to have different valuation bases for different assets?
Yes, it is necessary and useful to have different valuation bases for different assets. The different valuations can be used for differing classes of assets. Such as intangible fixed assets, tangible assets, biological assets, etc. Depending on the classification of the asset, an appropriate means of valuation, depreciation (and impairment if applicable) can be applied to the asset.
6.7 “In recent years, the IASB has clearly been moving towards the use of current values rather than historical costs.” Discuss.
Under the historical cost doctrine, assets are generally carried on the balance sheet at their acquisition cost and liabilities are usually carried at the prices at which they were incurred. For many years this model, which reflects the profession's traditionally conservative approach, was sufficient.
The use of historical cost has been a traditionally conservative approach and was proven sufficient for many years.
In recent years.
The International Financial Reporting Standards (IFRS) aims to make International Financial
Reporting Comparisons as easy as possible because each country has its set of accounting rules,
over the years the use of IFRS has emerged as widely used and accepted standards in the world
with more than 12000 companies and over 100 Countries accepting and mandating its
implementation. At presents India aim to be joining IFRS club from the financial year 2011 to
include, all listed companies, all banking companies, all financial institutions, all scheduled
commercial banks, all insurance companies and all NBFC.
Creative Accounting and Impact on Management Decision MakingWaqas Tariq
The study was conducted to appraise the impact of creative accounting on management decisions of selected companies listed in the Nigerian Stock Exchange. With the background, the main objective of the study includes the examination of the extent to which macro-manipulation of financial statement affects management decisions; to examine the extent to which macro-manipulation of financial statement affects share price performance; and to determine the impact of misreported assets and liabilities as well as making recommendations to help remedy some of the problems. The research method used was descriptive and the primary data collected were summarized and tabulated. These were picked in line with the hypothesis variables of the study so as to determine their validity. It was observed that the application of creativity in financial statement reporting significantly affects the decision of management to recapitalize the firm upward or dispose of it reserves. The study concluded that creative accounting through macro-manipulation of financial statements affects a firm’s price and capital market performance. In view of the study, the researcher recommended that the application of creative accounting on management decision should be to avoid misreporting of assets and liabilities in their financial report, and that management decision towards creative accounting should be geared towards the relative advantage principle and good corporate governance which encourage challenges to current ways of thinking and not manipulating for self interest.
In the backdrop of the buzz that Interest Rate Risk in the Banking Book (IRRBB) has generated in the banking industry, Aptivaa is pleased to launch a series of articles providing our perspective on various issues highlighted by our esteemed clients during interactions in the recent months. This post gives an overview of the revised guidelines on IRRBB which has been issued by the Basel Committee, the approaches and the associated challenges in the implementation of IRRBB framework for all internationally active banks.We look forward to your valuable feedback on the current article or the challenges faced by you in IRRBB implementation.
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
Yes of course, you can easily start mining pi network coin today and sell to legit pi vendors in the United States.
Here the telegram contact of my personal vendor.
@Pi_vendor_247
#pi network #pi coins #legit #passive income
#US
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Seminar: Gender Board Diversity through Ownership NetworksGRAPE
Seminar on gender diversity spillovers through ownership networks at FAME|GRAPE. Presenting novel research. Studies in economics and management using econometrics methods.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
Abhay Bhutada Leads Poonawalla Fincorp To Record Low NPA And Unprecedented Gr...Vighnesh Shashtri
Under the leadership of Abhay Bhutada, Poonawalla Fincorp has achieved record-low Non-Performing Assets (NPA) and witnessed unprecedented growth. Bhutada's strategic vision and effective management have significantly enhanced the company's financial health, showcasing a robust performance in the financial sector. This achievement underscores the company's resilience and ability to thrive in a competitive market, setting a new benchmark for operational excellence in the industry.
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Fair value accounting and loan loss provisioning early evidence from nigerian banking industry
1. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.8, 2013
50
Fair Value Accounting and Loan Loss Provisioning- Early
Evidence from Nigerian Banking Industry
Sunday C. Okaro* and Gloria O. Okafor
Department of Accounting, Nnamdi Azikiwe University, Awka, Nigeria
*E-mail of corresponding author: sundaychukwunedu@yahoo.com
Abstract
The purpose of this study is to investigate the Loan Loss Provisioning under International Financial Reporting
Standards (IFRS) and Nigerian Prudential Guidelines. The audited first time annual reports of four Nigerian
banks were analysed. Simple percentages and tables were used to determine the relationships between the
figures thrown out by the two provisioning models. We found that prudential guidelines provisions were more
aggressive and higher in all cases than IFRS provisions. In other words, the profit figures under prudential
guideline model were more conservative than the corresponding figures under the IFRS model. The result of the
study was based on 1 year 2012 audited first time IFRS accounts of 4 Nigerian banks and therefore cannot be
generalised but regarded as rather indicative of the differences between the two models. The paper has practical
implications for Nigerian regulatory authorities and in particular the CBN who may wish to retain its Loan Loss
Provisioning Model or transmute to the IFRS model. This is about the first study on Nigerian banks on this
subject matter post mandatory adoption of IFRS in 2012 and, has added to our knowledge of IFRS Loan Loss
Provisioning compared to the Nigerian Prudential guideline model.
Key Words: IFRS, Fair value, Prudential Guidelines, Loan Loss, Early Evidence.
Introduction
Nigeria mandated reporting under the International Financial Reporting Standards (IFRS) with effect from 1st
January 2012 with significant public interest entities leading the way. IFRS is very much affected by fair value
accounting (also called “mark to market” accounting). Some of the IFRS that rely heavily on fair value
measurements include:
i) IAS 16 which provides a fair value option for property, plant and equipment
ii) IAS 36 which requires asset impairments (impairment reversals) to fair value
iii) IAS 38 requires intangible assets impairments to fair value
iv) IAS 39 require fair value for financial instruments other than loans and receivables that are not held
for trading, securities held to maturity, and qualifying hedges.
IFRS buoyed by fair value reporting has attracted wide debate on its effect on the ability of an investor to
forecast earnings. One school of thought believes that better accounting standards make reported earnings less
noisy and more accurate given that all other things remain equal. In such a regime, earnings will be easier to
forecast. The other school of thought, however, believes that managers in a low quality reporting regime are
capable of smoothening reported earnings to meet objectives which include; reducing the volatility of their own
compensation; reducing the volatility of payments to other stakeholders ( e.g. employee bonuses and dividends);
reducing corporate taxes and avoiding recognition of losses. This contrasts with high quality regimes where
earnings will be expected to be more informative, more volatile and also more difficult to predict (Ball, 2005).
What is the early evidence of the effect of fair value accounting on accounting numbers in Nigeria’s banking
industry? This is the question that will guide the rest of this study which will proceed further as follows; review
of related literature; followed by chronicling the methodology of study; results of the study will be stated;
followed by the discussion of the results; we then conclude.
Literature Review
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date- exit price. Fair value measurement assumes
that a transaction takes place in the principal market for the asset or liability or , in the absence of a principal
market, in the most advantageous market for the asset or liability (KPMG, 2012). Fair value has also been
described in the context of IFRS as the amount for which an asset can be exchanged (or a liability be settled)
between knowledgeable, willing parties in an arm’s length transaction (Editor, 2011). Banks have long had
major issues with asset and liability recognition issues. The issue of IAS 32 dictating disclosure rules and IAS 39
dictating measurement rules for financial assets and liabilities was thus mired in controversy, a revised IFRS 9
has now been issued to better meet user needs (Baskerville & F 2011).The dust on whether fair value accounting
made worse the global financial crisis (otherwise referred to as economic meltdown) is yet to settle down. While
proponents of fair value accounting argue with gusto that fair value is not to blame, others forcefully argue that
2. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.8, 2013
51
the option helped bank management to under provide for non- performing loans resulting in overstatement of
profits and payment of undeserved dividends. The main challenge under IFRS is lack of active markets in
emerging economies where market prices can be obtained in order to comply with IFRS fair value accounting
rules. Under IFRS, fair value accounting focuses on the price at which an asset can be sold. For exchange traded
products such as stocks, bonds, and derivatives, prices are usually liquidation values unless they are loans and
receivables or held to maturity assets. There is need to clear conceptual issues on fair value accounting. Practical
issues relating to the concept need also to be addressed (Okaro, 2011)
The Ghanaian experience with fair value is that “there appears to be a struggle in determining fair value
especially in government securities”(Zori, 2011). In the case of Zambia their implementation of fair value, had
challenges in respect of valuation rules and loan loss provisioning as the subjectivity of assumptions inherent in
the standard can easily be manipulated by a bank to inflate its earnings. In Zambia also, other than foreign
exchange market which is very active Zambia’s markets are still inactive due to lack of secondary trading for
many financial instruments (Mwape, 2010). Elsewhere, IFRS has been assailed for not being fit for purpose
because it allowed banks to pay dividends and bonuses out of unrealized profits that were not certain (Wyman,
2011). In Nigeria, the regulatory authorities have been called upon to adopt a dynamic loan loss provisioning
model based on the expected loss model irrespective of the loan loss provisioning model adopted by IFRS.
Caution should be exercised in using the IFRS Loan loss provisioning model for internal decision making
(Blaauw, 2009).
Under the IFRS model, credit impairment is measured using the provisions in IAS39 which is based on an
incurred loss frame work. IFRS 9 which is an attempt to douse some of the criticisms of the credit measurement
provisions of IAS 39 is based on an expected loss model. Nigerian Banks are, however, yet to migrate to this
model. In Nigeria, providing for credit impairment is guided by the Central Bank of Nigeria (CBN) revised
prudential guidelines of 2010.
In addressing the challenges faced by the Nigerian Banking industry which was at the brink of a crisis as a result
of spiral effects of the global financial meltdown, the CBN undertook a review of the prudential guidelines. In
the revised guidelines, which became effective 1st of July, 2010, the CBN provided for the adaptation of the
prudential guidelines to IFRS after it has been adopted in Nigeria. Paragraph 12.4 of the revised Prudential
Guidelines for Deposit Money Banks in Nigeria stipulates that Banks would be required to make provisions for
loans as prescribed in the relevant IFRS Standards when IFRS is adopted. However, Banks would be required to
comply with the following: (a) Provisions for loans recognized in the profit and loss account should be
determined based on the requirements of IFRS. However, the IFRS provisions should be compared with
provisions determined under prudential guidelines and the expected impact/changes in general reserve should be
treated as follows: (i) Prudential Provisions is greater than IFRS provisions; transfer the difference from the
general reserve to a non-distributable regulatory reserve. (ii) Prudential Provisions is less than IFRS provisions;
the excess charges resulting should be transferred from the regulatory reserve account to the general reserve to
the extent of the non-distributable reserve previously recognized. (b) The non-distributable reserve should be
classified under Tier 1 as part of core capital (Omotola, 2012).
In the past, credit management in Nigeria’s banking sector, has been fraught with abuses Table 1 below shows
insider related credits attributable to bank directors that went awry in the wake of the liquidation of the banks.
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Table1: Credit Facilities Granted Owners and Directors of Some Liquidated Banks in the 1990’s
S/N Banks (in Liquidation) No of
Directors
involved
Amount as at
Closure(N)
% of Total
Risk Assets
Remarks
1 Alpha Merchant Bank Plc 11 1,314,418,700.43 33%
2 United Commercial Bank Ltd 5 741,755,808.86 30%
3 Financial Merchant Bank Ltd 1 383,061,096 100% The entire Portfolio
4 High Land Bank of Nig.Plc 12 33,197,157.58 38%
5 Commercial Trust Bank Ltd 1 247,749,719.10 38%
6 ABC Merchant Bank Ltd. 8 272,981,634.00 49%
7 Royal Merchant Bank Ltd. 7 646,940,182.23 69%
8 North- South Bank of Nig. Ltd 13 240,668,637.62 32%
9 Abacus Merchant Bank Ltd. 14 56888,254.11 47%
10 Credit Bank Nig. Ltd. 6 379,934,611.47 76%
11 Prime Merchant Bank Ltd. 1 539,292,310.00 64%
12 Amicable Bank of Nig. Ltd. 7 149,854,896.00 56%
13 Century Merchant Bank Ltd. 5 272,072,261.00 32%
14 Group Merchant Bank Ltd. 13 595,836,077.20 80%
15 Commerce Bank Plc. 4 1,294,851,665.64 52%
16 Pinnacle Commercial Bank Ltd. 10 298,766,751.76 20%
17 Republic Bank Ltd 1 161,375,466.00 38%
Source: Ogunleye (2005)
Allied to the issue of insider related credits is under provisioning for non- performing credits often from insider
related borrowers. Table 2 shows some of the banks that failed the CBN stress test and their auditors who
apparently were culpable for not qualifying their reports just before the banks found themselves in dire straits.
Table 2: Banks that Failed the CBN Stress Test
Bank Year End Auditor Date of Last
Audit Report
Audit
Opinion
Date
Problem
Surfaced
Remarks
Intercontinental 29/2/2008 PWC May 2008 Unqualified 2009 Loan loss provision as per
CBN is 278.2Billion Naira
and not 36 Billion per
audited accounts
Oceanic 31/12/2008 PWC May 2009 Unqualified 2009 Loan loss provision per
CBN is 210.9 Billion Naira
and not 16.6Billion Naira
as per audited accounts
Source: Adapted from Otusanya (2010)
Such was the magnitude of the under provisioning for loan losses. Credit management and loan loss provisioning
has thus been the Achilles hill of many Nigerian Banks.
Methodolgy
This study relied mainly on secondary data represented by the annual reports of four banks for the year ended
31st
December 2012. The choice of the four banks stems from the fact that they were the early birds in terms of
publishing the First mandatory IFRS accounts in Nigeria with sufficient details for analysis. The banks are
Zenith
bank, First bank, Guaranty trust bank and Access bank. These banks together control about 64% of the profits of
all banks in Nigeria(Prudential 2013). Meanwhile many of the banks are blaming the Central Bank of Nigeria
(CBN), the apex regulator of the banking industry for their failure to release their financial reports in time. CBN
has, however, denied the charge.(Komolafe & Nnorom 2013). The four banks are ranked among the five top
banks in the country along side UBA Plc. Absolute figures and simple percentages will be used to analyse the
effect of the prudential guideline provisions on the financials of the banks.
Results and Discussions
Table 3 shows the comparison for loan loss provisioning as per IFRS and Prudential Guideline Requirements
for First Bank Nigeria( PLC) for the year ended 31st
December, 2012.
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Table 3: Loan Loss Provisioning for First Bank (Nig) Plc under Prudential Guidelines and IFRS
Prudential Guideline Loan
Loss Provision(1)
N’Million
IFRS Credit Impairment
Charge (2)
N’Million
Difference
(1-2)
N’Million
Difference as Percentage
of Profit for the Year*
16,202 9,847 6,355 8.9%
*Profit for the year ended 31st
December 2013 from continuing operations = N’Million 71,144
Table 4 compares Loan loss provision under Prudential Guidelines with IFRS Impairment charge for Guaranty
Trust Bank Plc. for the year ended 31st
December, 2012
Table 4: Loan Loss Provisioning for Guaranty Trust Bank under Prudential Guideline and IFRS
Prudential Guideline
Loan Loss Provision(1)
N’Million
IFRS Credit Impairment
Charge (2)
N’Million
Difference
(1-2)
N’Million
Difference as Percentage
of Profit for the Year*
28,133.141 16,820.339 11,312.802 13.3%
* Profit for the Year ended 31st
December, 2012 from continuing operations = N’Million 85,263.826
Table 5 compares Loan Loss provisioning under Prudential Guidelines with IFRS impairment Charge for Access
Bank Plc for the Year ended 31st
December, 2012.
Table5: Loss Provisioning for Access Bank under Prudential Guidelines and IFRS
Prudential Guideline
Loan Loss Provision(1)
N’Million
IFRS Credit Impairment
Charge (2)
N’Million
Difference
(1-2)
N’Million
Difference as Percentage
of Profit for the Year*
36,122.378 33,314.034 2,808.344 7.7%
*Profit for the year ended 31st
December 2012 from continuing operations = N’ million 36,353.643
Table 6 compares loan loss provisioning under prudential guideline and IFRS Impairment Charge for Zenith
Bank of (Nig.)Plc. for the year ended 31st
December 2012
Table 6: Loan loss Provisioning for Zenith Bank (Nig) Plc. Under Prudential Guidelines and IFRS
Prudential Guideline
Loan Loss Provision(1)
N’Million
IFRS Credit Impairment
Charge (2)
N’Million
Difference
(1-2)
N’Million
Difference as Percentage
of Profit for the Year*
21,437 15,768 5,669 5.9%
*Profit for the year ended 31st
December 2012 from continuing operations = N’Million 95,803
Discussions
For all the banks, the prudential guidelines provisions were higher than the corresponding IFRS impairment
charge. The differences were of course taken to the credit of regulatory risk reserve which is part of Tier 1capital
as enjoined by the provisions of prudential guidelines. Zenith bank had lowest percentage of the difference
between the two provisions over the profit from continuing operations for the year to 31st
December 2012 at
5.9%. This is followed by Access bank at 7.7%. For First bank, the figure is 8.9% while Guaranty Trust bank
figure is as high as 13.3%. The figures show that the prudential guidelines provisions result in more conservative
profit figures as a result of higher loan loss provisions. There is a lot to commend the prudential guidelines
aggresive approach to loan loss provisioning given the welter of abuses that have characterised loan loss
provisioning in the history of banking in Nigeria. Already some of the banks are announcing enhanced dividend
payout ratio with attendant salutary effect on their share prices. Zenith bank, for example, is paying a dividend of
one Naira and sixty kobo only, up from
ninety five kobo or 68%. In the same vein, GT bank grew its dividend from one Naira and ten kobo only to one
naira and thirty kobo only or 18.18%. Banks are expected to migrate to incurred loss model with the
implementation of IFRS 9 on or after 1st
January, 2015.
Conclusion
This study set out to investigate empirically the loan loss provisioning model under IFRS and the Prudential
Guideline of Central Bank of Nigeria (CBN). To achieve the objective, the maiden IFRS annual accounts for the
year ended 31st
December 2012 of First bank, GT bank, Zenith bank and Access bank were analysed to reveal
the differences between the loan loss Provisioning under IFRS and the Prudential guideline. The differences
were expressed as % of their respective after tax profits for the year on continuing operations. GT bank led the
pack with
the difference between the loan loss provision as per prudential guideline and IFRS as a % of after tax profit on
continuing operation put at 13.3%. This was followed by First bank at 8.9%. Next on the line was Access bank at
7.7%. Zenith bank brought the rear at 5.9%. Overall, the result is consistent with expectation. The CBN revised
prudential guideline of 2010 was a reaction to the abuses in the banking sector in respect of loan loss
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Vol.4, No.8, 2013
54
provisioning
and was bound to produce more aggressive figures as loan loss provisions. The provision that such differences
be credited to a regulatory risk reserve not available for distribution has ensured that profits made by possible
under provision of loan losses are not available for distribution as dividends. As noted many Nigerian Banks are
already growing their dividends as a result of the profits reported in their first year IFRS audited accounts. In
doing this, they are pandering to the desire of the average Nigerian shareholder to see annual increases in his/her
dividends. For IFRS itself, flexibility allowed for various jurisdictions to determine how IFRS profits made by
companies within its purview are legally appropriated has come to its rescue as a standard that will gain
international acceptance. The argument that fair value allow banks to increase their leverage in periods of boom
is upheld in this Nigerian study.
Our findings should be interpreted in the light of the limitations of this study. First our study covered only four
banks ( although controlling over 60% of the profit of the industry) leaving out about ten other banks. Second the
data covered only one period of 12 months being the only available data as a result of the newness of the IFRS
regime in Nigeria. Despite these limitations, we believe that this study has thrown light on the implication of
loan loss provisioning under both IFRS model and the prudential guidelines. This result should inform the
regulators in
deciding whether or not to retain the provisions of the prudential guidelines alongside the IFRS fair value model
for loan loss provisioning as at present or even when the IFRS transmutes to the expected loss model under IFRS
9 in 2015.
References:
Adekola, A. A. (2012). First Bank of Nigeria Consolidated Financial Statements for the year ended 31st
December 2012, lagos.
Ball, R. (2005). International Financial Reporting Standards: Pros and Cons for investors. In PD Leake Lecture.
Wales: Institute of Chartered Accountaants, England and Wales, pp. 1–63.
Baskerville, R. F. C. (2011). 100 Questions ( and Answers) about IFRS. SSRN, pp.1–64.
Blaauw, A. (2009). Dynamic Provisioning and IFRS Adoption by Nigerian Banks. UBA, pp.1–3.
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