As insurers grapple with preparing their 2018 financial results in compliance with the new account standard, the International Financial Reporting Standard (IFRS) 9, the National Insurance Commission (NAICOM) has continued to senstitise them on how to have a seamless transition.
The commission made this known during a media session on IFRS 9 with reporters in Lagos.
The Director, Inspectorate, NAICOM, Mr. Barineka Thompson, said the key aspects of IFRS 9 is that it is a forward looking impairment assessment model for financial assets.
He said it is also a simpler and clearer classification, recognition and measurement rule while hedge accounting will be linked to the entity’s risk management framework.
He added that changes in own credit risk are to be recognised in other comprehensive income, reducing volatility in the profit or loss account.
He pointed out that for the operators to have a seamless transition, they need to embark on awareness training for senior management and members of the board of directors.
He said: “They need to develop roadmap for adoption and follow follow-up action; develop policies, procedures and governance structure 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 9and 17. They need to carry predominance test and present result to the board of directors for decision on choice of option; classification and measurement (‘C&M’) of financial assets assets– changes to IAS IAS39 categories with new tests/criteria tests/criteria to be met; develop, test, apply and validate new impairment model based on expected credit losses rather than incurred losses; appraise new hedge accounting criteria, expected to be of limited interest to insurers.
“Furthermore, we expect them to address organisational responsibilities aligning actuaries, risk and accounting identify, shared risk and actuarial data; conduct parallel testing and pilot phases for increased efficiency; IT architecture and infrastructure harmonisation for valuations and impairment calculations; new presentation and disclosure requirement. They also have to consider interpretation of new requirements and assess implications of having to apply new impairment rules to all financial assets other than equities.
“They must assess need to collect, verify and store credit data not currently used. Insurers should already have prepared themselves for IFRS 9 before January 1, 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 while they also file relevant report with the regulator for review and assessment”, he noted.