Matching and Mismatching between Insurers’ Assets and Liabilities: Emerging Patterns of “Shadow Accounting”

The paper, focusing on 2004 and 2005’s financial reports of the Italian insurers, aims to investigate the “shadow accounting adjustment” to the insurance liabilities referred to DPFs, connected with assets recognized as FVTPL (fair value to profit and loss) or AFS (available for sales), as long as insurers use different alternative ways to recognize the (shadow) deferred policyholder liabilities in the balance sheet. Empirical research, supported by documental analysis and interviews, will unable authors to discuss: if and when the adjustment is measured exactly in the same way of the increasing or decreasing of the fair value in assets related to DPFs;  if and when this adjustment is determined as a percentage of participation settled by DPFs, applied to the difference between (alternatively):- the book value (or the amortized cost) of DPF assets at the reporting date and their fair value at the same date;- as above, but with an adjustment to profit and loss account related to the difference between the value exposed in the balance sheet and the amount recognisable on DPFs.The final purpose of the paper is to point out emerging alternative patterns in measuring shadow adjustments of insurance liabilities in financial reports, also verifying what leads to these adjustments.