An assessment of the comparability of financial reporting by South African long-term insurers

[摘要] ENGLISH ABSTRACT:Existing long-term insurance financial reporting practices are heavily based onregulatory foundations. Although the reporting requirements of the long-terminsurance industry are unique, there is currently no comprehensive, up to dateFinancial Reporting Standard in South Africa for long-term insurers. The demandfor increased disclosure in the financial statements of long-term insurersincreases the importance of the basic accounting principles for these companiesas embodied in the Framework for the Preparation and Presentation of FinancialStatements, namely comparability, relevance, accuracy and understandability offinancial reporting.The SAICA Long-Term Insurance Interest Group discussed the withdrawal ofAC121 Disclosure in the Financial Statements of Long-Term Insurers and thereplacement thereof by way of other guidance. Ultimately the AccountingPractices Committee has firmly stated that it will not tolerate the ongoingimplementation of AC121 because it contradicted a number of other accountingstatements and indeed overrode those statements. With this in mind and takinginto account the program of harmonising South African accounting standardswith International Accounting Standards, it insisted that AC121 be withdrawn andreplaced by guidance notes only.The current lack of authoritative South African guidance on financial reporting bylong-term insurers results in the potential compromise of the basic qualitativecharacteristics of comparability and relevance in their financial statements, ascertain disclosures are voluntary rather than required.The aim of the research was to assess the impact of the lack of authoritativeSouth African financial reporting guidance relating to South African long-terminsurers on the basic financial statement characteristic of comparability.A literature study was undertaken and a checklist for disclosure in the long-terminsurance industry was drawn up. The objective was to highlight areas of noncomparabledisclosure for which financial reporting standards should be createdin order to provide guidance on financial reporting by South African long-terminsurers and, where possible, to suggest guidance. Financial statements ofselected South African long-term insurers were reviewed and measured againstthe checklist in order to make an assessment of comparability.Currently the disclosure of industry-specific items differs significantly amongstlong-term insurance companies in South Africa. The comparability test (oninformation disclosed in the 2002 annual reports of the selected companies) andthe research done on industry-specific items identified by this test indicated theextent of this non-comparability within the South African long-term insuranceindustry.In view of the recent withdrawal of AC121 and the results of the comparabilitytest, there is reason to believe that each long-term insurer in South Africadiscloses what it believes is right and what it believes the industry is required todisclose. This results in significant non-comparability between the financialstatements of South African long-term insurers.The author recommends that a long-term insurance industry accountingstatement in the AC500 series should be issuéd, which should provide theappropriate guidance not only to preparers of financial statements, but also toother users of financial statements in the long-term insurance industry, until suchtime as the international accounting project relating to long-term insurers iscomplete. Some work will be required to update and/or amend a new AC121 forthe AC500 series.

[发布机构] Stellenbosch University