The Financial Reporting Council (FRC) Monday suspended the Chairman of Stanbic IBTC Holdings, Mr. Atedo Peterside and three directors of the company from signing any financial statement, over allegations of improper discloses in the financial statement of the bank for 2013 and 2014.
These include the Managing Director/Chief Executive, Stabic IBTC, Mrs. Sola David-Borha, Mr. Arthur Oginga and Dr. Daru Owei.
Furthermore, the Council ordered directors of the Stanbic IBTC to withdraw the company’s financial statement for the 2013 and 2014 financial year, insisting the statements were not prepared in line with the International Financial Reporting Council (IFRS) and hence misleading.
How Stanbic IBTC misreported its expenses-FRC
According to the FRC, Stanbic IBTC misreported its operations expenses, by concealing vital and material expenses under ‘Other Operational Expenses’.
The Council stated, “Upon a preliminary review of the financial statements of Stanbic IBTC, the Council discovered that the group’s “Other Operating Expenses” contained line items that required further explanation. Consequently, the bank was directed to provide schedules showing the composition of each of the line items in Other Operating Expenses for all financial years from 2011 to 2014. Notable among these was the line item “professional fees”. Professional Fees As disclosed in the group’s financial statements, professional fees were incurred as follows: – 2014: N6,083,000,000; 2013: N4,467,000,000; – 2012: N6,057,000,000; 2011: N4,041,000,000.
“The schedule submitted to our Council by Stanbic IBTC revealed that professional fees which was simply a line in the financial statements contained several expenses that are unrelated to professional fees and which required separate disclosures on their own to give users of the financial statements good understand on the transactions and events of the bank.
These include: Franchise Fee – Included in professional fees for 2014 and 2013 were franchise fees of N2.3 billion and N1.9 billion respectively which were provisions made for franchise fee to be paid to Standard Bank of South Africa. See section below for more discussion of this matter. ii. Tax advisory fee and provision for tax liability assessment –
Also Included in the 2014 professional fees figure was N711million for “tax advisory fee and provision for tax liability assessment”. The Council was concerned that provisions for tax liability were included in professional fee. iii. Provision for litigation –In 2014, the sum of N752 million which the schedule revealed included “provision for litigations” was also included in professional fees when there is a financial reporting standard which requires separate disclosures of issues relating to litigations. Provision for Contingent and Other Known Losses.
Another major line item under “Other Operating Expenses” was provision for contingent and other known losses of N972m. Included in this amount was another N340.8 million also described as “provision for litigation”. The Council is concerned that the group did not seem to have a systematic method of recognizing and classifying its expenses as similar and related items were found under several expense categories.
“Others” in Other operating expenses: The Council has always made it stance known to reporting entities and their external auditors that descriptions in the financial statements such as “others”, “sundries” and “miscellaneous”, especially when these were substantial and material, was poor disclosure and should be avoided at all cost.
“Others” in Other Operating Expenses of Stanbic IBTC were as follows: 2014: N1,907,951,000; 2013: N2,477,201,000; 2012: N1,632,000,000; (whereas N1,946,000,000 was disclosed in the 2013 financial statements as 2012 comparative) 2011: N2,685,000,000.
The Council therefore investigated the balances further and discovered the following: Donations – Several donations were concealed in “Others”. The group disclosed its donations in the annual report in compliance with the requirement of CAMA CAP C20 LFN. However, just one line item of donations in “Others”, N275,000,000, far exceeded the aggregate donations disclosed in the annual report (N162,468,098).
Why is Stanbic IBTC not complying with the disclosure requirements of International Financial Reporting Standards on provisions and extant laws and regulations applicable in Nigeria?
Regulatory Breaches: The Council observed that Stanbic IBTC regularly flouts CBN regulations. In 2014 for instance, a total penalty of N28,000,000 was imposed on the group.
Among the contraventions was improper disclosure of public sector deposits in 2014.
Stanbic IBTC seems to have a penchant for poor disclosures which further corroborates
the findings in this report.”
Credit: Vanguard
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