Implementation on International Financial Reporting Standard for Insurance Contracts in Ghana: Constraints Faced by Insurance Companies in the Greater Accra Region

ABSTRACT

It was identified through a review conducted by the World Bank in 2004 that several weaknesses exist in the Accounting and Auditing practices in various sectors of the country. International Financial Reporting Standards (IFRSs) and International Standards on Auditing were used as the benchmarks for the assessment. The Report on the Observance of Standards and Codes, published in June 2004 was the result of the assessment. This contains recommendations to improve the reporting framework in Ghana. As part of the recommendations for the improvement of the Accounting and Auditing statutory framework, the World Bank recommended the adoption of IFRSs without any modifications. In line with these recommendations, in January 2007, Mr. KwadwoBaah-Wiredu, the then acting Minister of Finance and Economic Planning of Ghana, formally announced the launching of Ghana's adoption of IFRSs and the subsequent replacement of the local GASs.

However, there was no IFRS on Insurance Contracts, and Insurance Contracts were excluded from the scope of the existing IFRSs which would otherwise be relevant. Accounting practices for Insurance Contracts were as a result very diverse, and also often differed from practices in the other sectors. The board, therefore, developed an International Financial Reporting Standard (IFRS) on Insurance contracts which was the IFRS 4 – Insurance Contracts.

This new Standard (IFRS 4) if adopted by all Insurance Companies will bring many benefits to the industry. One of the benefits is that it will provide all financial statement users and preparers with greater comparability and transparency about performance as a direct result of consistent measurement and presentation models. Due to this and other benefits to be derived from the standard it has to be welcomed.

However, implementing this new standard is not an easy process but there will be important milestone to meet in the next few years. With everyone playing by the same rules and giving consideration to the recommendations made in the final chapter, implementing the IFRS 4 is likely to be short-term pain for a much longer term gain.