Determinants of Compliance With Disclosure Requirements of IFRS 4: Evidence From Quoted Insurance Companies in Nigeria

Abstract

Publicly quoted companies are expected to fully comply with disclosure requirements of International Financial Reporting Standards (IFRS) during the preparation and presentation of their financial reports. However, this is far from what is obtainable in real situation; as evident in the existing literature. Hence, this study examined the determinants of compliance with disclosure requirements of International Financial Reporting Standard (IFRS 4 - Insurance contracts) among quoted insurance companies in Nigeria; the study further examined the influence of four company attributes (leverage, profitability, liquidity, and size) on the extent of compliance. With the aid of a self-constructed compliance checklist, an index was derived to quantify the level of compliance with disclosure requirement of IFRS 4; after applying the checklist to the 2012-2014 annual reports of sample companies. The study used panel regression technique to examine the influence of the four company attributes on the extent of compliance. The results showed an aggregate mean compliance of 80.38% to IFRS 4 disclosure requirements. A significant positive relationship was found between the level of compliance and company liquidity, and profitability (both at 5% level of significance), while a significant negative relationship was found between company leverage and extent of compliance (at 10% significance level). The study recommended among others that; regulators’ compliance enforcement and monitoring mechanism be improved upon, as well as exercising great caution and put in more attention while assessing the disclosure compliance of highly leveraged companies.