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Uniform Systems of Accounting: Benchmarking players in the Nigerian Electricity Supply Industry (NESI)

Uniform Systems of Accounting: BP in the NESI

The Nigerian Electricity Supply Industry (NESI) remains a critical sector to the Nigerian economy and is regulated by Nigerian Electricity Regulatory Commission (NERC).

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Wale Ajayi

Partner, Tax, Regulatory and People Services

KPMG in Nigeria

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One of NERC’s key tasks is the review of licensees’ financial statements to serve as a useful parameter for tariff setting, measuring sector performance and general oversight of licensees to achieve some level of uniformity within the sector. With Nigeria concluding its full IFRS adoption of IFRSin 2014, all licensees as at today prepare and submit financial statements to NERC inline with International Financial Reporting Standards (IFRS). However, attempting to compare licensees across board using IFRS financial statements yields inconsistent results for regulatory purposes simply because it provides more than one basis of accounting for the same transactions.

For instance, items of property, plant and equipment could be accounted for at cost or at revalued amounts; depreciation could be determined using straight line or reducing balance method; Inventory can be measured using First-In-First-Out (FIFO) method, Weighted Average Cost (WAC) or specific identification method. The aforementioned examples are just a few of the divergent policy and estimate options allowable under IFRS that makes direct comparability of financial statements challenging for regulatory purposes.

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