The insurance regulator, National Insurance Commission (NAICOM), has observed that many insurance companies under its supervision failed to reciprocate its efforts at ensuring smooth transition from the Nigeria Generally Accepted Accounting Principles (NGAAP) to the International Financial Reporting Standards (IFRS).
The Director, Supervision at the commission, Mr. Nicholas Opara, opened up on the disappointment of the insurance regulator at the just-concluded seminar for Insurance Correspondents held in Ilorin, Kwara State.
According to him, the commission even went beyond its brief just to ensure that insurance companies, who were expected to have converted to IFRS since last year, understood what was required of them. He observed that, in spite of the effort of the commission in this direction, many of the operators failed to do what was expected of them at the right time.
“We have done more than enough to help them but many insurance companies did not reciprocate our effort at helping them to comply with IFRS. We are not interested in their penalty because it is peanuts and it does not bother them but we will not pass their financial reports until they get it right,” Opara said.
The supervision director also commented on the performance of some of the IFRS consultants working for some insurance companies, saying they were as ignorant as those they were consulting for. “Some of their consultants were cutting and pasting. They were only copying textbooks,” he said.
Speaking on the preliminary activities of the commission in this regard, the Commissioner for Insurance, Mr. Fola Daniel, last year, said the regulatory body would provide all assistance but would not recommend any system of conversion to the operators.
“It is important to note that we have not taken any position because it is up to each company to decide on what to do. What we have done is to provide a rallying leadership to minimise the risks implicit in wrong approaches to conversion and promote all possible opportunities for cooperation amongst operators with a view to achieving a seamless and cost effective transition as possible in the insurance industry,” Daniel explained.
NAICOM directed insurance and reinsurance companies under its supervision to convert to the newly introduced IFRS by the end of the first quarter of last year.
It explained its commitment to the adoption of IFRS, saying it was not only because it is one of the initiatives of the insurance industry under FSS 2020 programme, but also because it is an imperative for the recognition of our insurers and reinsurers.”
“Insurance and reinsurance companies, being public interest entities, are expected to start their transition from January 2, 2011 while insurance brokers being other public interest entities will take their turn in 2012,” the commission said.
In the same vein, insurance operators said IFRS was a welcome development in spite of all the challenges that conversion to it has brought upon them.
“It is a welcome development, particularly after we have concluded recapitalisation. My concern is the three months given to us to comply but we are all committed to it, so we should be able to comply with NAICOM because it is for our own benefit,” stated the Deputy Chairman of the Nigerian Insurers Association (NIA), Mr. Godwin Wiggle.
IFRS are principles-based standards, interpretations and framework adopted by the International Accounting Standards Board (IASB). It seeks to refine the existing concepts to reflect the changes in markets, business practices and the economic environment that have occurred in the two or more decades since the concepts were first developed.
The overall objective of IFRS is to create a sound foundation for future accounting standards that are principles-based, internally consistent and internationally converged.
It allows two basic accounting models, the financial capital maintenance in nominal monetary units (Historical cost accounting during low inflation and deflation) and financial capital maintenance in units of constant purchasing power (Constant item purchasing power Accounting during hyperinflation).
IFRS financial statements consist of Statement of Financial Position; Statement of Comprehensive Income or two separate Statements comprising an Income Statement and Statement of Comprehensive Income, which reconciles Profit or Loss on the Income Statement to Total Comprehensive Income.
In addition, it requires that companies present Statement of Changes in Equity (SOCE), Cash Flow Statement or Statement of Cash Flows and notes, including a summary of the significant accounting policies applied.
The main changes from GAAP is that IFRS requires an entity to present all non-owner changes in equity either in one statement of comprehensive income or separate income and comprehensive income statements.
It also requires that entities present a statement of financial position (balance sheet) as at the beginning of the earliest comparative period in a complete set of financial statements when the entity applies the new standard as well as a statement of cash flow and make necessary disclosures by the way of a note.