FRC Targets Transparency, Standardisation in Valuation Practices

Dike Onwuamaeze

The Chief Executive Officer/Executive Secretary of the Financial Reporting Council of Nigeria (FRC), Dr. Rabiu Olowo, has stated that the council is targeting increased transparency, standardisation of process, improved accountability and accuracy as well as alignment with international standards in the proposed valuation regulations for financial reporting in Nigeria.

Olowo stated this yesterday in his keynote speech at the Stakeholders’ Engagement on the Proposed Valuation for Financial Reporting Regulation held in Ikeja, Lagos State.

He explained that the significance of the stakeholders’ engagement could not be overstated as it would provide an invaluable opportunity for dialogue, collaboration, and shared perspectives on a subject that is central to the transparency, accountability and integrity of financial reporting.

He said: “Financial reporting is the cornerstone of trust in our markets and economy.

“The quality, reliability, and accuracy of financial statements directly impact investors, businesses, regulators, and the broader public.

“Today, we are discussing an aspect of financial reporting that plays a crucial role in the valuation of assets and liabilities – an area that directly influences financial decisions, economic policies, and market behaviour.”

Olowo explained that standardised valuation practices would provide clear and concise guidelines on how valuations should be conducted to ensure consistency in the approach used by different professionals and institutions and reduce the room for ambiguity and subjective interpretation.

“The proposed regulations require that the methods and assumptions used in valuations be clearly disclosed. This level of transparency is essential to ensure that stakeholders have a clear understanding of how values were derived and the underlying assumptions.

“By outlining the roles and responsibilities of valuers, auditors, and other key stakeholders, the regulations aim to improve the accountability of those involved in the valuation process. This will foster a culture of accuracy and integrity in financial reporting,” he said.

He added that the “the regulations are aligned with international best practices and standards, which is crucial for ensuring that our financial markets remain competitive, credible, and attractive to both domestic and international investors.

“Clear and objective valuation standards help minimise the risks of errors, conflicts of interest, and disputes that can arise from inconsistent valuation practices.”

Olowo averred that valuation is not merely an exercise of assigning a monetary value to assets or liabilities but an intricate process that required rigorous methods, a deep understanding of market dynamics, and adherence to well-defined standards.

He said: “The proposed valuation regulations are designed to address the need for consistency, clarity, and reliability in the valuation process, ensuring that financial statements reflect the true financial position and performance of an entity.

“The accuracy of these valuations is vital, as financial reporting influences key decisions, from the allocation of resources to investment strategies, mergers and acquisitions, regulatory compliance, and tax assessments.

“Moreover, in an increasingly globalised and interconnected economy, the ability to compare financial statements across borders demands a robust and universally accepted framework for valuation.”

According to him, the proposed regulations are an important step forward in ensuring that valuations are conducted in a manner that upholds the principles of fairness, transparency, and accuracy.

“They provide a structured approach to valuation that will help standardize practices, mitigate risks associated with subjective judgment, and enhance the comparability of financial statements across entities and jurisdictions.”

Olowo recognised that the engagement and stakeholders’ input into the proposed regulation in important because the success of these regulations is hinged on the active participation of all stakeholders.

He said: “Financial reporting does not exist in a vacuum – it involves multiple parties, including regulators, valuers, auditors, investors, and business leaders.

“Today’s engagement session is designed to be an open forum for discussion and feedback.

“Your insights, concerns, and suggestions are invaluable in ensuring that the regulations are practical, comprehensive, and effective.

“This is a collaborative process, and it is crucial that we continue to refine and improve the regulatory framework based on the real-world experiences and expertise of those who interact with financial reporting daily.”

He, therefore, encouraged the stakeholders to ask questions and share their perspectives, adding that “whether you represent a business, an auditing firm, a financial institution, or a regulatory body, your voice is essential in shaping the final regulations.

“The feedback we receive today will be carefully considered as we move forward in finalising the regulations.

“We are committed to ensuring that the regulations not only meet the needs of the market but also uphold the principles of fairness, integrity, and trust that are at the core of sound financial reporting.”