The profit of insurance companies that report under IFRS is affected by three rates of return – the liability pricing rate, the return from investments, and the IFRS 17 discount rate. The first two largely determine the magnitude of aggregate profit; the last mainly affects the timing of profit recognition and its classification as a service result or net financial result. We use an interactive model to explain how interest rates determine the reported results of insurance companies. The il...| The Footnotes Analyst
Investors are paying increased attention to risks and opportunities arising from sustainability related issues, particularly the effects of climate change and related ‘net-zero’ commitments made by many companies. Some sustainability risks directly affect financial statements, but you need to look further when considering inputs for equity valuation. Risk affects different aspects of equity valuation. It is well known that risk factors affect the discount rate, but the impact on other val...| The Footnotes Analyst
The IASB will shortly issue its new international standard for the presentation of financial statements - IFRS 18. Changes that will benefit investors include a prescribed operating-investing-financing structure for the income statement, new defined subtotals, additional disaggregation, and a more relevant cash flow presentation. IFRS 18 will better align financial reporting with equity analysis and provide additional and more comparable data to facilitate that analysis, including data that s...| The Footnotes Analyst
Investors require financial data that is comparable over time, comparable within a single set of financial statements, and comparable between companies. Unfortunately, this is not always the case. We explain how differences between IFRS and US GAAP, accounting policy options, differing interpretations and accounting estimates, can all reduce comparability. Convergence and comparability should be a priority for the IASB and FASB. Present consultations by the IASB and FASB regarding the account...| The Footnotes Analyst
