IFRS 4 Disclosure and Firm Performance of Insurance Companies in Nigeria

IFRS 4 is an International Accounting Standard Board providing guideline for the accounting of insurance contract. This paper therefore, examined the compliance of IFRS 4 and performance of quoted Insurance Companies in Nigeria. The study further investigate the extent of compliance with disclosure requirements of IFRS 4 and determined the relationship between ROA, liquidity, ROE, leverage and firm size with compliance of IFRS4 disclosure. Quantitative grading system was used to investigate the extent of compliance. Multiple regression analysis was further used to find out the relationship between ROA, liquidity, ROE, leverage and firm size with compliance of IFRS 4 disclosures. The study found that the sampled companies complied at 90% which suggest a strong compliance. ROA, ROE, and Liquidity have a positive significant relationship with compliance with a p-values of 0.0324<0.05, 0.01<0.05, and 0.0247<0.05 respectively. The study also found that leverage is negative but has a significant relationship with compliance. Therefore, the study recommends that, the Inspectorate unit which is the monitoring and enforcement mechanisms need to be improved upon. Although, the level of compliance is good, but mandatory disclosures are meant to be fully complied with 100%.

The IFRS 17 contractual service margin: a life insurance perspective

IFRS 17 Insurance Contracts is a new accounting standard currently expected to come into force on 1 January 2023. It supersedes IFRS 4 Insurance Contracts. IFRS 17 establishes key principles that entities must apply in all aspects of the accounting of insurance contracts. In doing so, the Standard aims to increase the usefulness, comparability, transparency and quality of financial statements. A fundamental concept introduced by IFRS 17 is the contractual service margin (CSM). This represents the unearned profit that an entity expects to earn as it provides services. However, as a principles-based standard, IFRS 17 results in entities having to apply significant judgement when determining the inputs, assumptions and techniques it uses to determine the CSM at each reporting period. In general, the Standard resolves broad categories of mismatches which arise under IFRS 4. Notable examples include mismatches between assets recorded at current market value and liabilities calculated using fixed discount rates as well as inconsistencies in the timing of profit recognition over the duration of an insurance contract. However, there are requirements of IFRS 17 that may create economic or accounting mismatches of its own. For example, new mismatches could arise between the measurement of underlying contracts and the corresponding reinsurance held. Additionally, mismatches can still arise between the measurement of liabilities and the assets that support the liabilities. This paper explores the technical, operational and commercial issues that arise across these and other areas focusing on the CSM. As a standard that is still very much in its infancy, and for which wider consensus on topics is yet to be achieved, this paper aims to provide readers with a deeper understanding of the issues and opportunities that accompany it.

5.8. New model of insurance contract measurement as the factor for the improvement of the quality of financial statements

Статья посвящена проблемам реформирования учета страховых договоров в соответствии с требованиями международных стандартов финансовой отчетности (МСФО). Прежний подход к учету предполагал отсутствие единой последовательной учетной политики в отношении страховых договоров, разрешал применять учетные практики тех стран, в которых находится эмитент страхового договора, что влекло за собой ряд проблем. Автор статьи исследовал специфику и провел критический анализ требований нового стандарта МСФО (IFRS) 17, оценил преимущества нового подхода, а также последствия внедрения и влияние стандарта на транспарентность финансовой отчетности компании-страховщика. The article deals with issues related to the problems of reformation of insurance contracts’ accounting. The existing Standard, IFRS 4, allows insurers to account differently for insurance contracts they issue, even if those contracts are similar. Further, many insurers’ financial statements lack regular updates of the value of insurance obligations to reflect the effect of changes in the economic environment, such as changes in interest rates and risks. The author of the research has made critical analysis of requirements of the new standard, measured the impact of new rules at the transparency of financial statements.

Do Financial Experts on the Board Matter? An Empirical Test From the United Kingdom’s Non-Life Insurance Industry

We examine the relation between board-level financial expertise and six measures of performance using panel data drawn from the United Kingdom’s non-life insurance industry. We find that collectively, financial experts have a beneficial influence on the performance outcomes of insurers. We also observe that board-level qualified accountants and actuaries are linked with superior performance in all six of our selected financial outcome measures. Professional insurance underwriters are associated with sound solvency levels (low leverage) and underwriting results, but not positive earnings-based measures. This suggests that underwriters may not be as adept at group-level earnings enhancement as accountants and actuaries. In addition, we find that the introduction of IFRS 4 in 2004/2005 did not have a significant impact on board composition and financial outcomes. Finally, we consider that our results could have commercial and/or policy implications.