Proposed valuation regulations for financial reporting to boost investments – FRC

The Financial Reporting Council of Nigeria (FRC) on Friday said its proposed valuation regulations for financial reporting would enhance the nation’s attractiveness to foreign direct investment.

This was stated by Rabiu Olowo, executive secretary/CEO of the FRC, during a stakeholders’ engagement session in Lagos on Friday.

“Financial reporting is the cornerstone of trust in our markets and economy,” Olowo said. “The quality, reliability, and accuracy of financial statements directly impact investors, businesses, regulators, and the broader public. Today, we are addressing a critical aspect of financial reporting: the valuation of assets and liabilities, which profoundly influences financial decisions, economic policies, and market behavior”, he noted.

He emphasised the importance of valuation as a rigorous and intricate process, noting that the proposed regulations aimed to standardise valuation practices, improve transparency, and ensure the accuracy of financial statements.

“Valuation is not just about assigning monetary value to assets or liabilities. It requires adherence to well-defined standards and a deep understanding of market dynamics,” Olowo added.

The regulations are designed to address several key areas, including consistency, clarity, and reliability in valuation methods. By doing so, they seek to ensure financial statements accurately reflect the financial position and performance of entities, ultimately bolstering investor confidence.

Highlighting the potential impact, Olowo remarked, “The accuracy of valuations influences key decisions such as resource allocation, investment strategies, mergers and acquisitions, regulatory compliance, and tax assessments. Furthermore, in today’s interconnected economy, the ability to compare financial statements across borders demands a robust and universally accepted valuation framework.”

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Olowo explained that the regulations would provide clear guidelines to reduce ambiguity and subjective judgment in valuations. They would also require full disclosure of methods and assumptions used, ensuring transparency. By defining roles and responsibilities for valuers, auditors, and other stakeholders, the regulations aim to foster accountability and integrity in financial reporting.

The proposed regulations align with international best practices, ensuring Nigeria’s financial markets remain competitive and credible. This alignment is expected to reduce risks of errors and conflicts of interest while enhancing comparability across entities and jurisdictions.

He also stressed the importance of collaboration, noting that the success of the proposed regulations depends on input from diverse stakeholders, including valuers, auditors, regulators, investors, and business leaders.

“This engagement session is an open forum for discussion and feedback. Your insights are invaluable in ensuring the regulations are practical and effective. Whether you represent a business, auditing firm, financial institution, or regulatory body, your voice is essential in shaping the final regulations”, said Olowo.

Participants were encouraged to contribute actively during the session and beyond, as additional opportunities for engagement are planned in the coming months. Olowo assured stakeholders that their feedback would be carefully considered in refining the regulations.

“Our commitment is to uphold fairness, integrity, and trust in financial reporting,” Olowo concluded. “Together, we can ensure that the valuation process remains a strong pillar of financial reporting and serves the interests of all stakeholders”, he stated.

The proposed regulations align with international best practices, reinforcing Nigeria’s financial markets’ competitiveness and credibility while creating a conducive environment for both domestic and international investors.

Ishola Sulaimon, from Deloitte & Touche, and one the technical working groups, said, “we need to have a regulation that will stand the test of time. To ensure we have the final document, getting your feedback is important.”

While giving the overview of the proposed valuation regulation, Ugochukwu Nwora, head, directorate of Valuation Standard, emphasised the need for the regulation in order to attract much needed foreign direct investment.