CHAPTER ONEINTRODUCTION1.1 Background to the StudyInternational Financial Reporting Standards (IFRS) are standards by the InternationalAccounting Standard Board (IASB) to serve as a guide to companies for preparation offinancial statements that will give true financial and non-financial information (integratedfinancial reporting) to investors and other stakeholders who use them for economicdecisions (Brabec, 2014; de Villiers, Venter, & Hsiao, 2016). IFRS implementationbecame globally important because of increasing international trade and globalization ofthe world’s capital market. Many countries of the world including Nigeria have adoptedthe standards for the preparation of their accounts. The standards aimed to provide acommon global rule to business affairs that will increase disclosure and improve thequality of financial information for both current and potential investors. The overallphilosophy was to make financial statements understandable, comparable, relevant, andreliable in the financial markets around the world. Specifically noted benefits ofimplementation of IFRS are improved disclosure, transparency, understandability, andcomparability of financial statements for investors leading to a reduction in informationasymmetry, greater willingness of investors to invest (Cameran, Campa, & Pettinicchio,2014; Donnelly, 2016; Matari, Swidi, & Fadzil, 2014).Improved disclosure of quality information yields benefits such like reduction in the costof capital, more efficient allocation of resources, higher economic growth, higher marketefficiency, and improvement in analyst predictions (Matari et al., 2014; Santos, Ponte, &Mapurunga, 2013).
Improved disclosure and quality of information enhance investors’ assessment offinancial performance of a firm and their willingness to invest more because the morefavourable the result of the assessment is the more investments made. Financialperformance refers to the improvement in the economic activities of a firm as measuredby profit or loss over a given period.Nigeria adopted IFRS in 2012 because the level and quality of disclosure prior to theadoption of IFRS was poor. The benefits expected to derive from the adoption andimplementations include easier access to external capital and an increase in foreign directinvestment. Investors and lenders need financial information that is reliable, relevant, andcomparable across the border to assess the risks and returns of their investmentopportunities (Omobolanle, 2017). Insurance companies are peculiar in the accounting reflection of the activities undertaken,because of the complexity in their operations. The reflections in their accounting basedon supporting documents and financial statements. So, specific to these categories ofcorporate entities are subject to legislative changes frequently. Therefore, the transition tonew standard accounting rules under IFRS will automatically necessitates changes in thefinancial culture of the insurance companies, and of course present to them someopportunities and difficulties. Insurers embarking on the IFRS journey will have theirhands full understanding the new policies and keeping pace with changes requiredthroughout the organization, including in accounting and financial reporting,finance/treasury, investment management, risk and controls, performance and decisions,actuarial and claims management, and tax, among others (Delloite, 2008).
Oseni, L (2019). IMPACT OF International Financial Rating Standard ADOPTION ON THE PROFITABILITY IN THE INSURANCE INDUSTRY. Afribary.com: Retrieved January 21, 2021, from https://afribary.com/works/impact-of-ifrs-adoption-on-the-profitability-in-the-insurance-industry-corrected
Lawal, Oseni. "IMPACT OF International Financial Rating Standard ADOPTION ON THE PROFITABILITY IN THE INSURANCE INDUSTRY" Afribary.com. Afribary.com, 26 Dec. 2019, https://afribary.com/works/impact-of-ifrs-adoption-on-the-profitability-in-the-insurance-industry-corrected . Accessed 21 Jan. 2021.
Lawal, Oseni. "IMPACT OF International Financial Rating Standard ADOPTION ON THE PROFITABILITY IN THE INSURANCE INDUSTRY". Afribary.com, Afribary.com, 26 Dec. 2019. Web. 21 Jan. 2021. < https://afribary.com/works/impact-of-ifrs-adoption-on-the-profitability-in-the-insurance-industry-corrected >.
Lawal, Oseni. "IMPACT OF International Financial Rating Standard ADOPTION ON THE PROFITABILITY IN THE INSURANCE INDUSTRY" Afribary.com (2019). Accessed January 21, 2021. https://afribary.com/works/impact-of-ifrs-adoption-on-the-profitability-in-the-insurance-industry-corrected