Insurance firms failing to comply with IFRS on account preparation

 By: Modestus Anaesoronye

Eight months into the new financial year, most insurance companies have failed to prepare their annual accounts for the year ended December 2012. BusinessDay learnt that the companies are finding it difficult to prepare their accounts in line with the international financial reporting standards (IFRS) due to skill gaps on the part of consultants.

As at the last count only eight out of the over 50 operating insurance companies have submitted and gained approval from the National Insurance Commission (NAICOM) for their 2012 accounts, while 20 others are at various levels of completion.

While other financial institutions like banks have since complied with IFRS in their 2012 financial accounts rendition, insurance companies are lagging behind due largely to technical difficulty arising from the uniqueness of their transactions which have a lot to do with actuary and valuation, for which current consultants and experts are lacking.

An industry operator who spoke to BusinessDay said the biggest challenge with compliance which has created a lot of apprehension for insurance companies are shortage of IFRS experts to guide organisations on compliance.

"The experts are very few and at the same time are learning from the process and that is why we are having these challenges. But I think we will get over it with time," the operator stated.

Eddie Efekoha, managing director, Consolidated Hallmark Insurance plc said that though the transition to the IFRS reporting was not as seamless as envisaged in the industry, subsequent years would be less problematic for the players because of lessons learnt so far. KPMG Financial services had identified the challenges companies will face in the adoption of IFRS to include expertise and companies’ underestimation of the difficulty relating to the transition.

In relation to expertise, Tola Adeyemi, partner and head, audit services, KPMG noted that it is simply the shortage of people with the required skills and experience to help companies with the transition.

"When there is no expertise internally, they have to go out and get consultants who could assist them. There is a lot of training and re-orientation required for all professional accountants in Nigeria today, and the truth of the matter is that they cannot resolve the expertise issue in one day. It takes time to overcome," he said.

"The challenge the companies are facing is that sometimes they have underestimated how difficult the transition to IFRS is going to be. Some of them thought this is something they can just do very quickly, or that it would take a couple of days or few weeks. And then, there is the shock to find out that it requires an intensive time because it affects people, it affects systems, it affects processes, and they are finding out that these are not as simple as they thought."

Source: BusinessDay