Why asset valuation is key to IPSAS adoption in Nigeria
The real estate sector perched recently on the brink of history, when a global forum for international valuation professionals – the International Conference on the Valuation of Plant, Machinery and Equipment (ICVPME) was told recently that three states in Nigeria is on the verge of valuing its assets for their financial statements.
The proposed valuation is expected to be conducted under the International Public Sector Accounting Standards (IPSAS), which is a new yardstick for measuring the performance of the public sector. It will show the relation between Written Down Value (WDV) and fair value of assets held by the entities.
Speaking at the forum on the Review of Plant and Equipment Valuation under International Public Sector Accounting Standards in Developing Countries – Case Study of Nigeria, an estate surveyor and valuer, Mr. Paul Osaji, who made the disclosure, stated that since the adoption of IPSAS in 2010, Nigeria is still playing catch-up on its implementation.
Osaji stated that the challenges of adopting IPSAS in Nigeria as follows; lack of trained Staff – Entities or governments that want to migrate to IPSAS must have a core of officials with the required technical skills;ICT infrastructure and skill gap – Huge information technology infrastructural resources are needed. Power supply, which is a major challenge in Nigeria, would make its deployment more challenging.
Political challenges: Inadequate support at the highest level of the executive; identification and valuation of assets and liabilities.He pointed out that “inadequate statistical data on government assets – is a major issue for valuers as most government entities do not know the items they own and in some cases, who is using them, also the acquisition and maintenance records are sketchy.
“Tagging of assets for ease of identification are non-existent, at most, an improperly recorded asset register will be provided. Funding requirements for assets valuation is a challenge for some states as well as “Lack of technical knowledge on the accounting requirements for asset valuation. This calls for international accounting and valuation collaboration for the support of the two professions.”Osaji who advocated international accounting and valuation collaboration for the support of the two professions also noted that adequate funding for the implementation of IPSAS is crucial.
According to him, global capacity development is very essential, as this will give the adoption of IPSAS an additional impetus. Donor agencies and developed countries should increase their budget allocation for the program to assist developing countries. On the performance of IPSAS in Nigeria, he said, the Federal Government was able to apply it on cash basis for its 2014 financial statements but adopted it in 2016 financial statement on IPSAS accrual basis. While states have not made any appreciable progress.
Lagos State became the first state government to adopt Accrual Basis in the preparation of its 2016 financial statements. “Ondo State adopted Accrual Basis in the preparation of its 2018 Financial Statements. However, the financial statements did not reflect the full valuation of its assets. The state has since called for proposals for the valuation of its assets.“Delta State is currently valuing its assets for the preparation of 2019 financial statements. Rivers State has called for proposals for valuation of its assets in preparation for implementation of Accrual IPSAS in the 2020 financial statements,” Osaji said.
He revealed that IPSAS recognizes fair value model, impairment losses and full disclosures. “Financial information transparency is vital so that users of financial statements can understand the methodology and make their own judgments,” he noted.
The Chairman ICVPME, Alexander Lopatnikov, said: “With valuation gaining recognition as a profession all over the world, it becomes evident that valuation education and knowledge sharing is critical to delivering reliable as well as relevant valuations. Constantly changing markets and regulatory environment make it both necessary and difficult to remain current on valuation matters.
“This is why attending a professional valuation conference gives you a competitive edge providing a valuable opportunity to discuss the latest trends and developments in the profession, exchange views with fellow valuers of their experience, accepted valuation techniques, and reliable data sources.
Lopatnikov stressed that many national and international professional valuation organizations provide their members with guidance on valuation standards and methodology. “For many years American Society of Appraisers remains a leader in fostering valuation best practices in business valuation and plant and machinery valuation,” he added.
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