The Value Relevance of 'Realistic Reporting': Evidence from UK Life Insurers
54 Pages Posted: 10 Sep 2006
Date Written: August 1, 2006
Following IFRS 4, the current accounting regime for UK life insurance companies is oriented towards delaying the recognition and distribution of profit, and is still largely rooted in requirements for statutory solvency reporting. This paper tests empirically the value relevance of the alternative 'realistic reporting regime' of voluntary embedded value (EV) disclosures that has been generally adopted by leading UK and Continental European insurers. In recent years EVs have also been used internally, but not disclosed, by many US life insurers. The results found here are consistent with value relevance and some implications for standard setters are explored.
Keywords: Insurance, Embedded Value, Realistic Reporting, UK
JEL Classification: M41
Suggested Citation: Suggested Citation