On July 19, 2023, President Bola Ahmed Tinubu approved the Financial Reporting Council of Nigeria (Amendment) Act 2023 (referred to as "the Act" or "Amendment Act"). It is important to note that this Act does not repeal the Financial Reporting Council of Nigeria Act 2011 (known as "the Principal Act"). Instead, it introduces key innovation to align the Principal Act with normative standards for operational efficiency and effectiveness of financial reporting and corporate governance regulations in Nigeria.

The key changes of the Amendment Act are as follows:

1. Definition of “Public Interest Entities: 

The Act has now expressly defined “public interest entities” to include:

• Governments and government organizations
• Listed entities on any recognised exchange in Nigeria
• Non- listed entities that are regulated
• Public limited companies
• Private companies that are holding companies of public or regulated entities
• Concession entities
• Privatised entities in which government retains an interest
• Entities engaged by any tier of government in public works with annual contract sum of N1 billion and above, and settled from public funds
• Licensees of government; and
• All other entities with an annual turnover of N30 billion and above.

2. Compliance with Corporate Governance:

 The Act has given express authority to the Directorate of Inspection and Monitoring to monitor compliance with corporate governance standards adopted by the council. This is in addition to their role of monitoring compliance with auditing, accounting, actuarial, and valuation standards and guidelines reviewed and adopted by the council. This entails that organisations are to align themselves by following established rules, being transparent in their actions, practicing ethical behavior, maintaining accurate financial records, and ensuring fair governance practices.

3. Promotion of Compliance with Adopted Standards: 

Under the Act, the council has been charged with an additional duty of ensuring compliance with the adopted standards issued by the International Financial Reporting Standards Foundation (IFRS), and the International Public Sector Accounting Standards Board (IPSASB) in relation to financial reporting, auditing, and corporate governance of public interest entities.

4. Development, Adoption, and Consistency of Auditing Standards: 

In addition to keeping up-to-date auditing standards issued by relevant professional bodies, the Act has now charged the council with the duty of ensuring consistency between the auditing standards issued by the International Auditing and Assurance Standards Board (IAASB), International Organisation of Supreme Audit Institutions (INTOSAI), and any other international standards setting body relating to the mandate of the council.

5. Establishing a "National Repository" for GP Financials Online Submission: 

The Act introduces a national repository for electronic submission of general-purpose financial statements by public interest entities. In essence, the Act establishes a centralised digital database mandated for public interest entities to electronically lodge their general-purpose financial statements.

6. Annual Dues for Registered Professionals: 

The Act has also increased the minimum annual dues for registered professionals. Under the Principal Act, registered professionals were required to pay a minimum of N5,000 annually, however the amended act has increased this minimum to not less than N10,000.

7. Revised Levy Structure for Publicly Quoted Companies: 

Under the Principal Act, publicly quoted companies paid levies based on market capitalisation as follows:

• 1% of market capitalisation or N250,000, whichever is lower, for companies with a market capitalisation not exceeding N1 billion.
• 04% of market capitalisation or N2,000,000, whichever is lower, for companies with a market capitalisation exceeding N1 billion but not more than N500 billion.
• A fixed amount of N5,000,000 for companies with a market capitalisation exceeding N500 billion.

However, the Amendment Act has made a significant review of the fee structure as follows:

• Companies with a market capitalisation not exceeding N1 billion pay either 0.10% of market capitalisation or N500,000 (whichever is higher).
• For companies with a market capitalisation greater than N1 billion but not exceeding N5 billion, they pay either 0.04% of market capitalisation or N2 million (whichever is higher).
• Similar tiered percentages continue for companies with higher market capitalizations.

8. Updated Levy Structure for Public Interest Entities: 

The Act introduced an updated tiered levy structure for public interest entities based on their annual turnover. Under the Principal Act, public interest entities paid levies based on their annual turnover, ranging from N5,000 to N1,000,000. However, the Amendment Act has updated the structure for public interest entities, which is now based on a percentage of annual turnover, with different percentages for different turnover ranges.

9. Dues Payment Schedule: 

The Act now introduces a timeline for the payment of dues. Individual professionals and professional firms are required to pay their dues not later than 60 days from January 1st of each year. Public interest entities and other entities have a longer payment window, with a due date not later than 120 days from the financial year's start.

10. Penalties for Non-Registration of Professionals: 

The Act has increased the fine for non-registration of professionals. Under the Principal Act, non-registered professionals were liable to a fine not exceeding N500,000.00 (Five Hundred Thousand Naira) or to imprisonment for a term not exceeding 6 months or both. The Amendment Act has increased the maximum fine significantly to a sum of N5,000,000 (Five Million Naira) or any other amount as may be prescribed through regulation from time to time.

11. Annual Renewal of Registration:

 The Act now mandates annual registration renewal. This change underscores the intent to maintain up-to-date and accurate information in the register of professionals.

12. Review and monitoring of auditing standards: 

The council has been charged with an additional responsibility to develop or adopt and maintain current auditing standards issued by relevant professional bodies. Also, as earlier mentioned, it now mandates consistency between these standards, the International Auditing and Assurance Standards Board's pronouncements, and other designated international standard-setting bodies aligned with the council's mandate. This provision underscores the council's commitment to international best practices, ensuring the quality and relevance of auditing standards. By referencing "relevant professional bodies," the council collaborates with industry experts, while the requirement for up-to-date standards reflects adaptability to evolving business landscapes.

13. Preparation of Financial Reports in accordance with Standards:

 The Act introduces a comprehensive framework for the adoption of accounts, financial reports, annual returns, and other pertinent documents required by a range of acts, which is to be adopted by the council for that purpose. The Amendment Act now provides for the inclusion of the;

• Finance Act
• Fiscal Responsibility Act, and
• Finance, Control and Management Act

14. Sanctions for non-compliance of Public Interest Entities: 

The Act provides a sanction for public interest entities who fail to adopt the standard of financial reporting required by the Act. Where a person or public interest entity fails to adhere to such a standard, a corrected report must be shown to the council and any government department that makes a request for it. However, if they fail to present the corrected reports within 60 days, such defaulting entity will pay a fine of N25,000,000 (Twenty-Five Million Naira) or more as decided by the council.

The Act promotes efficiency, transparency and adherence to international standards. Entities operating in Nigeria should therefore ensure they align their operations with Act.