IFRS: Underwriters battle to produce compliant accounts

 .three firms sent drafts to NAICOM

Chuks Udo Okonta

Barely three months to the deadline for submission of last years' financial reports, only three out of the 60 insurance and re-insurance firms have so far sent their draft copies of International Financial Reporting Standard (IFRS) compliant accounts to the National Insurance Commission (NAICOM), Inspen has learnt.

The Director Supervision NAICOM, Nicholas Opara, who disclosed this at the workshop in Lagos, said the drafts were returned to the companies as there are still areas to be worked on.

He said last year's financial reports of operators are so special to the industry, as the reports herald the migration to the new financial reporting regime.

He said: "At the moment, no company has submitted full IFRS compliant account. Is was only three companies that have sent in their drafts, which we have returned to them as there are still many things they are yet to get right.

"The 2012 reports are special because it is different from what we have been doing in the past."

According to a roadmap to guide companies’ on transition to IFRS, insurance and reinsurance companies classified under public interest entities are expected to start their transition from January 01, 2011, while the insurance brokers classified under other public interest entities will take their turn in 2012.

The transition from the National Standard to IFRS was endorsed by the Federal Government on July 28, 2010, to take effect January 1, 2012.

Commissioner for Insurance Fola Daniel, on efforts by NAICOM to ensure the actualisation of the IFRS initiative said the commission has been engaging operators, auditors, directors and management of companies on how to seamlessly migrate to the initiative.

He said two main outcomes have been reached by NAICOM and stakeholders on the initiative, adding that first, it was agreed that the market should adopt common approach to IFRS provided that such option will not place any individual company or the market at a competitive disadvantage domestically and internationally. Secondly, it was agreed that an accounting practices committee made up of the representative of NAICOM, insurers/reinsurers and external auditors should be set up. The function of the committee is to address all accounting issues of concern to the industry including those emerging from IFRS standard setting process.

He said board of directors of each company are responsible for the issuance of financial statements, and that consequently, both transition and sustenance of IFRS in accounting practices, should be a major item on directors’ agenda at this time.

Daniel noted that NAICOM’s decision to engage stakeholders was informed by the need not only to create awareness of the implication of IFRS for financial reporting responsibilities but also to acquaint them with the scale of change and the sense of urgency in the attention it deserves.

"Our expectation is that at the end of our engagements, the stakeholders will have sufficient level of understanding as to know what critical questions to ask and what steps to take in the bid to ensure that their companies successfully transit to and embed IFRS in their accounting practices within the timelines specified in the Nigerian Roadmap. While saying this, it is important to note that we are committed to supporting the stakeholders in the process. For this purpose, we have set up an IFRS help desk in the commission to address issues that companies may have in the process of transiting to IFRS.

"We have succeeded in significantly improving the level of compliance with the Nigerian GAAP by getting some companies to amend their financial statements to reflect a standard we believe all operators should comply with, if their financials will be relevant and useful to both domestic and international users. The feedback we received from many informed users was encouraging. The price for this change for some companies was significant, as not only did they have to make major provisions that significantly impacted their shareholders fund, it took them quite some time to deal with our queries resulting in delays in the submission of the financials to the Nigerian Stock Exchange.

"In a bid to further improve on the quality of the financials of insurance and reinsurance companies, we released a proforma complete financial statement for comments by stakeholders. The key change that the document seeks to introduce is improved financial reporting from a disclosure perspective. We want to encourage companies to take advantage of the information in this document to improve both the presentation and disclosure of their audited financial statements. Perhaps it is important to say that companies that do not significantly improve their reporting along the lines prescribed stand the risk of being disadvantaged when their financial are compared with their competitors," he said.