Adoption of IFRS 9: NAICOM highlights stakeholders’ roles
In its bid to ensure compliance with international corporate governance, the National Insurance Commission (NAICOM) has highlighted its roles and those of underwriters in the adoption of the International Financial Reporting Standards (IFRS) 9.
Director, Inspectorate, NAICOM, Mr. Barineka Thompson, while presenting a paper entitled “IFRS 9 Implementation –The Role Of Financial Sector Operators & Regulators” at a one-day awareness workshop for Insurance and Pension Correspondents at Oriental Hotel, Lekki, Lagos, said that insurance operators are to engage on awareness training for senior management and members of the board of their directors.
He said they are to develop road map for adoption and follow -up action; develop policies, procedures and governance structures for implementation and perform an impact assessment to determine the high level implications of applying the new C&M requirements, including potential accounting mismatches and resulting volatility of IFRS 9 and carry out predominance test and present result to the board of directors for decision on choice of option.
According to NAICOM, operators are also to engage on classification and measurement of financial assets, develop test, apply and validate new impairment model based on expected credit losses rather than incurred losses.
Operators are also to appraise new hedge accounting criteria, expected to be of limited interest to insurers; address organizational responsibilities aligning actuaries, risk and accounting identity shared risk and actuarial data and conduct parallel testing and pilot phases for increased efficiency.
They are to also consider interpretation of new requirements and assess implications of having to apply new impairment rules to all financial assets
“Insurers should already have prepared themselves for IFRS 9 before 1 January 2018 against year end financial statements and if relevant, have performed and concluded all testing and disclosure requirements.
“The tax impact of any accounting decisions, judgements and transitional adjustments arising from IFRS 9 will need to be understood and assessed alongside those arising from IFRS 17 to fully understand the overall impact, including on tax profile and volatility.
“File relevant report with the regulator for review and assessment,” he said.
On the roles of NAICOM, he said the regulator has to engage on sensitization workshop for key stakeholders; issuance of supervisory guidance to operators in the event of observed apathy; conduct training of supervisory staff and have continuous interaction with operators for enhanced quality of financial reporting of IFRS 9
According to him, the commission would also ensure compliance with the all new and amended standards.
In applying IFRS 9 with amendments to IFRS 4, he said the amendments to IFRS 4 were issued on 12 September 2016 to deal with additional accounting mismatches and temporary volatility in profit or loss if IFRS 9 were applied before IFRS 17; reassessment of the classification and measurement of financial assets under IFRS 9 when adopting IFRS 17 to minimize accounting mismatches.
Other reasons for the amendment, according to him, were Significant costs and effort arising from two sets of major accounting changes in a short space of time because the period between the two effective dates is short; concerns that financial statements of issuers of insurance contracts will be difficult to understand due to different applicability dates (2018 & 2021) and insurance players were concerned that all above mismatches would be difficult to explain to users of financial statements hence the adoption of IFRS 9.
