October 11, 2023
On 9 October 2023, the Financial Reporting Council of Nigeria (FRCN or “the Council”) issued a Public Notice on required documents for early adoption of the International Financial Reporting Standards (IFRS) S1 and S2 Sustainability Disclosure Standards. The Public Notice specifies the requirements for reporting entities to be classified as early adopters as well as the required documents for submission.
Sustainability is becoming a very important concept, globally and nationally. Governments and regulatory bodies are recognizing the importance of sustainability and responsible business practices, and they are implementing measures to encourage integration of sustainability principles into business practices.
The International Sustainability Standards Board (ISSB) in a bid to provide a comprehensive global baseline of high-quality sustainability-related financial disclosures to meet the information needs of users of general-purpose financial reports, developed the IFRS S1 and S2 Standards.
These standards, which are referred to as IFRS Sustainability Disclosure Standards, set out requirements for disclosures about a company’s sustainability-related governance, strategy, risk management, metrics and targets and information about climate-related risks and opportunities. These standards are important, especially for companies that publish their financial statements in line with IFRS. The standards were launched globally and in Nigeria on 26 June 2023 and will become effective for annual reporting periods beginning on or after January 1, 2024.
In November 2022 at the Conference of Parties (COP) 27, the FRCN announced Nigeria’s intention to be an early adopter of the IFRS Sustainability Disclosure Standards. The FRCN is a Federal Government agency established to, among other things, develop and publish accounting and financial reporting standards to be observed in the preparation of financial statements of public entities in Nigeria; and for other related matters.
In line with the early adoption stance of the FRCN, the Federal Government of Nigeria on 6 June 2023, inaugurated the Adoption Readiness Working Group (ARWG) for the implementation of the Sustainability Reporting Standards. To propel Nigeria’s ambition as the first to adopt the standards in Africa and one of the first globally, the FRCN issued the Public Notice to aid its current process of identifying early adopters.
Requirements for Early Adopters
An early adopter is a reporting entity that has elected to adopt the IFRS S1 and S2 for the accounting period ending on or before December 31, 2023, which is before the effective date of the standards.
The reporting entity must:
To meet the FRCN’s readiness requirement, entities electing to be early adopters are to submit the following documents:
Based on the Public Notice, the FRCN may request further documentation or information from entities to determine their readiness for adoption. The soft copy of the submissions is to be forwarded to email@example.com while the hard copy will be forwarded to FRC’s head office on or before October 31, 2023. According to the Public Notice, only entities that have elected to be early adopters and meet the requirements of the FRCN’s Readiness Test will be allowed to assert that they are early adopters.
Given the global interest in sustainability, and Nigeria’s ambition to be an early adopter of the IFRS Sustainability Disclosure Standards, it is important for organisations currently reporting on the sustainability measures to take advantage of enlisting as early adopters in line with a comprehensive global framework. Andersen will continue to monitor events and provide updates, where necessary. In the meantime, potential early adopters need to liaise with their consultants in the conversion of their sustainability reporting to align with the IFRS Standards.