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IFRS 9 implementation burdens insurance firms

Delays 2018 financial results

By Rosemary Onuoha

SHAREHOLDERS as well as other stakeholders of some insurance companies will have to exercise longer patience waiting for the 2018 full year financial results as many of the companies came under the burden of implementation of the International Financial Reporting Standard 9, IFRS9, in the 2018 financial year as against initial scheduled period of 2020.

Although some investors are of the opinion that the delay could prevent them from taking positions on some insurance companies as and when due, they see the implementation of IFRS as a welcome development saying that insurance companies have delayed the implementation for too long.

Commencement ofimplementation

Information gathered by Financial Vanguard reveals that the National Insurance Commission, NAICOM, at a meeting with insurance companies last month, mandated them to commence implementation of IFRS9 with effect from 2018 full year financial report.

File: insurance

Speaking on the development, Mr. Patrick Ajudua, a shareholder, said that it is worrisome that the insurance sector is yet to commence implementation of IFRS, which is a universal standard, when the banking sector have commenced two years ago.

Also speaking to Financial Vanguard, Director, Supervision, NAICOM, Mr. Barineka Thompson, said that the IFRS 9 is a universal standard and not a regulation of NAICOM, and as such, the regulator cannot compel insurers to commence implementation because it is what they have to do naturally.

However, some insurance companies have besieged the Nigerian Stock Exchange, NSE, with notices of late submission of financial results due to the sudden implementation of the IFRS 9.

For instance in a notice to the Nigerian Stock Exchange, NSE, African Alliance Insurance stated, “African Alliance Insurance Plc wishes to notify its esteemed shareholders and other stakeholders that the company has obtained the approval of the NSE for the extension of time to file its audited financial statements for the period ended March 31, 2019.

“The extension of time to file the aforementioned accounts has become imperative to give the company time to comply with NAICOM’s recent guideline on the implementation of the new IFRS9 accounting standard which was initially scheduled to commence in 2020. Following a stakeholders meeting with NAICOM held in February, insurance companies have been advised to embrace implementation of the IFRS9 and make necessary adjustments in its ongoing audit exercise.”

Similarly, Mutual Benefits Assurance Plc’s notice to the NSE stated, “Mutual Benefits wishes to inform its valued shareholders, investing public and key stakeholders that the company may be unable to meet the deadline of March 31, 2019, to file the audited financial statements for the year ended December 31, 2018 in line with the listing rules of the exchange. As an entity subject to a primary government regulator, NAICOM, and being an insurance organisation, we are affected by the adoption and implementation of IFRS9 which deals with financial instruments and IFRS 4 on insurance contracts.

“Our primary regulator NAICOM only recently released the guidance on the implementation of the two accounting standards and held the consultative meeting with the industry on February 12, 2019. These events have affected the finalization of our audited financial statements and we envisage that the primary regulator would not have approved the financial statements by March 30, 2019. The results will be published as soon as we obtain the approval of the primary regulator.”

Investing community

Also, Royal Exchange Plc stated: “The management of Royal Exchange Plc would like to advise our esteemed shareholders, key stakeholders and the investing community that from available information, the company will not be able to submit its 2018 audited financial statements for the year ended December 31, 2018 as well as the unaudited financial statements for the period ending March 31, 2019 to the Nigerian Stock Exchange within the timeframe required by the NSE.

“As a holding company with five different subsidiaries, the audit exercise for the group is yet to be concluded due to the adoption of IFRS 4. NAICOM recently issued guidelines for implementation of the standards and held a stakeholders meeting with insurance companies on February 12, 2019. The implementation  of these new accounting standards will undoubtedly delay the completion of the audit process and submission of the 2018 audited financial statements and consequently the unaudited financial statements for the period ending March 31, 2019.”

On its part, Veritas Capital Assurance stated, “Veritas Kapital Assurance wishes to inform its valued shareholders, investing public and key stakeholders that the company may be unable to meet the deadline of March 31, 2019, to file the audited financial statements for the year ended December 31, 2018 in line with the listings rules of the Nigerian Stock Exchange.

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“As an entity subject to a primary government regulator, NAICOM, and being an insurance organization, we are affected by the adoption and implementation of IFRS9 which deals with financial instruments and IFRS4 on insurance contracts.”

Staco Insurance Plc stated, “Staco Insurance wishes to notify the NSE, our esteemed shareholders and other stakeholders that the company has obtained the approval of the exchange for extension of time to file its audited financial statements for the year ended December 31, 2018 on or before June 30, 2019.

“The extension of time to file the 2018 audited financial statements is imperative as the company is in the process of obtaining an approval of the audited financial statements for the year ended December31, 2017 from its primary regulator, NAICOM. In addition, the implementation of IFRS 9 on financial instruments and IFRS 4 on insurance contracts would occasion a delay in the finalization of the company’s 2018 audited financial statements, thereby resulting in a delay in the submission of the 2018 audited financial statement to the Exchange”

Others include Universal Insurance Company Plc which said, “The management of Universal Insurance Plc hereby notifies its shareholders, stakeholders and the investing public that the company approached the NSE and requested an extension of time to file the company’s audited financial statements for the year ended 31 December, 2018. The company being an insurance company subject to a primary regulator, NAICOM, is affected by the directive on the adoption and implementation of IFRS 9 on financial instruments and IFRS 4 on insurance contracts. The company’s auditors subsequently advised the company that the implementation of the two accounting standards would delay the completion of the audit process and would further cause a delay in the submission of the 2018 audited financial statements.”

Law Union and Rock Insurance stated, “Law Union and Rock Insurance wishes to inform its esteemed shareholders and the investing public that due to issues relating to the recently introduced IFRS 9 conversion required for the preparation of the 2018 audited financial accounts, there may be a delay in the filling and publication of the audited accounts beyond the regulatory timeline as required by the Nigerian stock exchange.”

Also, Guinea Insurance stated, “The board of directors and management of Guinea Insurance wishes to inform the general public that it will be unable to submit its 2018 audited financial statement within the regulatory timeline of March 31, 2019 as required by the NSE.

“Guinea Insurance being an insurance company is subject to a primary regulator, NAICOM, and is affected by the adoption and implementation of IFRS9 on financial instruments and IFRS 4 on insurance contracts.”

Shareholders reaction

Speaking further on the development, Ajudua said that shareholders are ready to exercise patience and give insurers ample time to commence IFRS 9 implementation because it will distinguish strong players from the weak ones.

He said, “I am aware that many insurance companies have been getting ready to commence implementation of IFRS in 2020. However, the directive to commence implementation of the IFRS 9 now is for the interest of the companies. However, this will negatively affect companies that are yet to gather their acts together. I know that some companies won’t be affected by this because they have been getting ready long before now.”

 

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