Adoption of IFRS 9: NAICOM reiterates support for Insurers
L-R: Head, Lagos Control Office, National Pension Commission, Kenneth Egwu; Director, Inspectorate, NAICOM, Barineka Thompson; Deputy Commissioner for Insurance, Technical, Sunday, Thomas and Head, Commissioner’s Office, Rasaaq ‘Salami at the event.
The National Insurance Commission (NAICOM) said it will continue to offer a helping hand for insurers to enable them succeed in adopting International Financial Reporting Standard (IFRS) 9.
Deputy Commissioner for Insurance (Technical), NAICOM, Mr. Sunday Thomas, said this during a media parley in Lagos yesterday.
While giving insight into the transition from IFRS 4 to IFRS 9 and preparation for full adoption of IFRS 17 in 2022, he said “As a Commission, we have tried as much as possible to make it a lot easy for the market and our doors are well open for people who may want to make enquiries.
“It is also important for us to mention here that while pursuing the implementation of FIRS Nine, we are learning from the gaps that have been existed and by the time we get to the adoption of IFRS 17 which has given us a longer period for adoption which is 2022, we would have been able to perfect the act so that there will be a seamless flow via the market.
“Since 2008 world financial crisis, relevant institutions and regulators have been concerned about accounting for transactions within the financial services. As a result of that so many financial accounting boards have come up with some standards that will be simple for a layman’s understanding and comparability of financial statements through the adoption of those standards.
“Of course, as far as insurance industry is concerned, remember the adoption of IFRS Four some years back and now with the setting of new standards IFRS Nine which essentially relates to classification and measurement of financial instruments.
“As far as the transit is concerned these are areas of concern and these are things that we need to understand. Of course, beyond the classifications and measurements of financial instruments, hedging is part of the things that has been dealt with in FIRS Nine.
“What we have done as regulator of financial services sector was first and foremost to issue the guideline, for the implementation of FIRS Nine, that we have sent to the market requesting for views and opinion from them.
“We have engaged the Chief Financial Officers (CFO) of all the companies where the Director, Inspectorate, addressed them. Thereafter, we have invited the companies on one on one basis, where companies were requested to let us know how far they have gone with the implementation and what their challenges were and each company was asked to give a presentation on the extent of their implementation.
“In house, as a Commission, we are repositioning for enhanced efficiency because we believe that there is nothing that is static. This we do in order to meet the challenges of the market. We will continue to look at our system and those things we need to move, we will definitely move them to their proper places so that we will be able to meet the challenges of the market.”
He said because of adoption of IFRS 9, insurance companies are now expected to submit their 2018 financial result at the end of April instead of March 31 which is a statutory date for them to do so.
This, according to him is due to late adoption of the International Financial Reporting Standard (IFRS) which supposed to have taken effect since 2018.
He said because of the late adoption the Commission has reached out to other sister regulators such as the Security and Exchange Commission (SEC), and the Nigeria Stock Exchange (NSE) to grant all the quoted insurance companies a month period of grace for filling their financial results.
According to him, “We recognize the fact that because of the late adoption of IFRS Nine; I called it late adoption because IFRS Nine supposed to have commenced since 2018.
“Because of late adoption, we have reached out to sister regulators, such as Security and Exchange Commission (SEC) and the Stock Exchange Commission (NSE) to grant our regulated entities what we called Regulatory Forbearance with regards to late submission of returns.
“We have spoken with them and we have also written to them to grant our regulated entities one month extension for filling their financial returns late.
“So, what it means is that quoted companies that are not able to file their financial report in IFRS format at the end of March will not be penalized until one month after”
Giving details of IFRS 9 and what the Commission is doing and what they are expecting from insurers, Director, Inspectorate, NAICOM, Barineka Thompson, said the implementation of the standard will have no significant negative effect on insurance companies, adding that the impact of IFRS 9 is mostly felt and will be felt by banks whose portfolio are predominantly debt portfolio or debt instruments.
“We are not expecting significant or negative impact on the insurers because if you go through the books of insurance companies you will see that the investments that is related to debt nature are mostly in company instruments, Government bonds etc, so it’s not like they are given personal loans to individual or corporate bodies which is the job or transaction of banks.
“It is not that we are saying that there was no form of impact or loss by the reason of classification and measurement modelling, what we are saying is that they are insignificant,” he said.
On the financial account submission date extension, he explain that the insurance companies should be given more time because the insurance business and accounting are peculiar, that is why it has taken the IASB over 15 years to come out with an accounting system or acceptable model for insurance.
“We have to take time to make sure we understand what it really means and how to implement. Decision process and points and number of things we need to put in place are not things expected of people in other sectors.
“These are not expected in other sectors in financial system and that is why International Accounting Standard (IAS) thought it wise to bring those options so the insurance companies will take time to ensure its well implemented” he said.
He insisted that the IFRS is not made, originated or facilitated by NAICOM as it isn’t made for insurance companies alone but for all financial services sectors.
The adoption and implementation of IFRS 17 which effective date was initially slated for January 2021, has also been shifted till January 2022.
