The Financial Reporting Council of Nigeria (FRC) has written to FIJ to say it would issue a rule to ensure publicly listed companies publish adequate contingent liabilities information.

This comes three months after FIJ wrote to the council and published a report detailing how some companies were underreporting financial claims against them.

In FIJ’s report, we exposed how some companies were jointly and severally sued in 2014 and claims made against each of them amounted to N1.2 trillion.

This case had dragged on for nine years, and for each year, the companies failed to inform stakeholders and investors of its status in violation of IAS 37, part of International Financial Reporting Standards (IFRS) set up by the International Accounting Standards Board (IASB).

Reacting via a letter signed by Titus Osawe, a Director in FRC’s Directorate of Corporate Governance, the council said the violation was possible because of an exploitable gap in IAS 37.

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The letter read in part: “Interestingly, Council generally observed an exploitable gap in discloure requirements as per IAS 37: Provisions, Contingent Liabilities and Contingent Assets, especially as it relates to Contingent Liabilities. Paragraph 92 of IAS 37 which states that ‘In extremely rare cases, disclosures of some or all of the information required by paragraph 84-89 can be expected to prejudice seriously the position of the entity in a dispute with other parties on the subject matter of the provision, contingent liability or contingent asset. In such cases, an entity need not disclose the information, but shall disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed’ is instructive in this regard. This implies that entities are not compelled to disclose number of claims and financial implications thereon as such information has the potential to prejudice their position in disputes with other parties.”

READ MORE: Despite Pledging to Regulate Companies Violating Accounting Standards, FRC Silent 3 Months After FIJ’s Investigation

This provision in paragraph 92 of the IAS 37 means that companies are compelled to include some details of the disputes they cannot disclose to protect the position of the entity, but our investigation showed that companies were not disclosing anything at all.

“However, also considering the potential consequences of insufficient disclosures in the financial statements of entities resulting from paragraph 92, Council has resolved to issue a Rule that will address this and other related matter(s). Over time, you shall see the effect of this in financial statements in the years to come,” FRC said in their letter.

FIJ called the number attached to the letter, but no one responded. We wanted to ask if the FRC would sanction errant companies, when the rule would take effect, and if the changes would reflect in the 2023 annual reports.