An Article Review on: The impact of accounting changes on regulation

The IFRS 9 includes requirements for recognition and measurement, impairment,

derecognition and general hedge accounting. The chosen journal includes issues by
proposing amendments to the existing IFRS4. The exposure draft of the application of
IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts proposed the temporary
exemption from applying IFRS9 for certain entities that issue contracts in the scope of the
deferral approach in the IFRS 4 as well as the exclusion from the profit or loss of the
difference between the amounts recognized under IFRS 9 and IAS 39 which includes the
overlay approach. Before January 1, 2021, entities will be permitted to defer the
application of IFRS 9 for annual reporting periods. Assessment of the eligibility based on
the ratio of liabilities arising from these activities as well as the liabilities that are
connected to those activities compared to the entity’s total liabilities is a requirement. If
the ratio resulted to 91% or higher, an entity’s activities would be deemed predominantly
related to insurance, on the other hand, if the ratio is above 80% but less than or equal to
90%, the entity can offer evidence that they do not have significant activity that is
unrelated to insurance.
Moreover, this forthcoming insurance contracts standard will require consistent
accounting for insurance contracts, which will provide ability to analyse results more
meaningfully across entities and jurisdictions. By implementing this, several impacts were
mentioned in the journal which will require significant changes on the part of both the
preparers as well as the users of insurers’ financial statements.
The article is entitled “The development of insurance law in the Philippines,”
published on the 23rd of December 2014 by Atty. Dennis Funa. It explained how
insurance developed in the country, and as stated, it is correct that the first insurance law
was incorporated in the Spanish Code of Commerce. However, the author had a mistake
in stating the provisions of the code, because it is said that the provisions concerning
insurance can be found in Title VIII of Book II, when it is in fact in Title VII of Book II, as
stated on the introduction of Insurance Commission.
Act 1459 or “the corporation law,” and Act 2427 or “the insurance act,” repealed
some of the provisions of the Spanish Code of Commerce and all laws or parts of laws
that is inconsistent and is in conflict with the act. Additionally, Act 2427 is the act revising
the insurance laws and regulates insurance business in the Philippines.
The statements in the article are all true, but the author could have done better if
he specified some of its information, including the amount of increase of capital
requirements for life and nonlife insurance under RA 10607, and also by correctly
indicating the title of RA 9829 or the “Pre-need Code of the Philippines.”
Overall, the article is helpful for researchers, but its mistakes should be corrected
and updated by the author.
Given in the article, both IFRS 9 and the forthcoming replacement of IFRS 4 are
expected to result in major accounting changes for most issuers of insurance contracts.
However, these changes will result to an improved accounting standard which will benefit
the preparer’s and users of insurer’s financial statements. This will serve as a great
advantage to the accounting profession since the new standard that will replace IFRS 4
will require reporting entities to use consistent accounting policies which will enable users
of financial statements to compare a company with other reporting entities and will reduce
the complexity of a single set of financial statements.It will also be easier for the preparer
of the financial statements since they will only focus on one accounting policy. The new
standard will also provide transparency of information since investors will be equipped
with better information on insurance contracts and its values. The new standard will also
result to improving governance standards which will not only help achieve compliance but
also reduce costs, minimize manual errors and make it easier to access risk insight, all
leading to better management of the business. As future accountants, this would also
help us to improve the way of analyzing insurance contracts and presenting financial
statements.