Financial experts have highlighted that proper valuation standards can enhance the financial reporting of firms in Nigeria and attract foreign investments within and outside Nigeria.
This was disclosed during the valuation seminar c0-organised by BusinessDay and Diya Fatimilehin & Co. last week themed ‘Decoding Valuation Standards: Implications for Financial Reporting and Investment’.
“The theme of the event is broadly about the importance of valuation standards in Nigeria and to the Nigerian economy. There is a firm connection between valuation and global connectedness in business and credible valuation standards are critical in achieving the goal of the N1 trillion economy in 2030,” Gboyega Fatimilehin, founding partner of Diya Fatimilehin & Co. said in his open remarks.
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He said proper asset valuation and accurate financial reporting are important for attracting investment both domestic and international into the Nigerian economy to ensure credibility of reporting.
“Consistent application of asset valuation standards help stakeholders to make better-informed decisions by providing a more transparent and reliable view of the company’s assets and their impact on the financial statement,” he added.
Rabiu Olowo, chief executive officer of the Financial Reporting Council, represented by Ugochukwu Obu Nwora, said that through valuation standards, investors can confidently make accurate decisions.
“Investors rely on the financial reports before investing and if they are not accurate, they can end up making the wrong investment decision that will impact their assets. Experts from different stakeholders have been assembled to ensure that the first-ever valuation standards in Nigeria should be out before the end of August 2024,” he added.
In a fireside session, Chris Thorne, director of Valuology, said the purpose of valuation is to give businesses insights into key decision-making, stressing that it is essential for financial stability.
“It is very important to have adequate standard valuation in reporting. Valuation is a theoretical transaction so it is important to have rules on how such a hypothesis is developed which doesn’t have to be common. Investors need to trust and understand how it’s delivered,” he said.
He added that the recent changes in interest rates and exchange rates around the world require a revaluation of markets to measure all of those risks. However, there are no best valuation methods, valuers need to understand their market dynamics and take into consideration the risks involved.
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During the panel session, Jamiu Olakinsan highlighted the best practices to ensure that the revaluation translates into accurate reporting, stating that the valuation report serves as an input into the financial reporting of the firm.
“The key financial reporting requirements for tangible assets can be classified into property, plant, and equipment which is not mandatory to carry them at fair value and the second is an investment property for either capital appreciation or rental purpose,” he said.
He emphasised the importance of disclosing the value used through financial reporting with valuation techniques such as market approach, income approach, or cost approach.
