Financial Reporting Council says transactions that require approval of a statutory body can be recognised without the approval
Rule 4 issued by the Financial Reporting Council of Nigeria prohibits an entity from recognising a transaction or event of a financial nature that requires approval or registration or any act to be performed by a statutory body in Nigeria until such approval has been obtained. Such transactions or events shall be regarded as having financial reporting implication only when such act has been performed or the approval / registration obtained.
For instance, as a result of this rule, companies that have entered into various foreign agreements such as technical services, licence agreement, management services etc that require the approval of the National Office for Technology Acquisition and Promotion (NOTAP) were not allowed to accrue for such expenses or otherwise recognize the payment for the expenses incurred in their financial statements.
Other common transactions requiring regulatory approvals include fixed assets certification, management fees, and certain incentives. It is noteworthy that a recent court decision had ruled against this rule in a case involving Stanbic IBTC Bank. The revocation is therefore consistent with the court ruling.
The revocation takes effect from 11 July 2019 and it is to be applied prospectively.
A copy of the Rule revocation is attached:
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