Financial reporting dilemmas for retirement benefit schemes: Evidence from the Uganda (Published)
Purpose: Firstly, to determine the state of compliance by Ugandan retirement benefit schemes with the financial reporting guideline issued by the Uganda Retirement Benefits Regulatory Authority (the regulator) in June 2017. Secondly, in regard to adoption of International Financial Reporting Standard (IFRS 9 – Financial Instruments) which became effective in 2018. Thirdly, with regard to the external auditor’s disclosure in the Independent Auditor’s report under International Standards on Auditing (ISA 701 – Key Audit Matters) which became effective in 2016. Methodology: A sample of 50 of a population of 63 retirement benefit schemes in Uganda was selected. The sample comprised 37682 contributing members with average assets of US$ 8.35million per Scheme and annual average income of US$ 1.07million per Scheme. Audited financial statements for the years 2017 and 2018 were examined and specific quantitative data extracted. A questionnaire was also administered to the partners who signed off the opinions in the Independent Auditor’s report of the sampled retirement benefit schemes. Results: There was 100% compliance in regard to some of the information guided by the regulator. This was the need to present the statement of changes in net assets, statement of net assets and statement of cash flows in the given format. 88% complied with the format for the statement of cash flows. However, the biggest challenge was on the five-year financial trend of the Scheme where only 40% complied. The other was only 50% complied with IFRS 9 – Financial Instruments (both in terms of accounting policies and disclosures). 82% of the Independent Auditors’ reports disclosed Key Audit Matters. Significance of study: This study is timely for any gaps to be corrected for the financial year 2019. Whilst the regulator attempted to standardize the financial reporting, a specialized area of expected credit losses under IFRS 9 requires attention. In particular, Schemes can be provided with the assumptions to be used in their IFRS 9 model given that the economic condition in Uganda are the same for all of them. In addition, there should be a consensus on the applicability of ISA 701 for retirement benefit schemes and whether they are publicly accountable entities. Future research: A survey approach can be adopted in which a sample of members of retirement benefit schemes can participate in commenting on the good and challenges they have faced with the financial statements and the independent auditor’s reports.
Keywords: Big-4, Financial Reporting, SMP, retirement benefits