Managers’ discretion in purchase price allocation: a comparison between U.K. and Italian insurers

Under IFRS, accounting for business combinations deserves a specific treatment when mergers and acquisitions occur among insurers. Spe-cific intangibles related to the insurance business can be recognized in the consolidated financial statement, and managers have discretion in the purchase price allocation.For sectors other than the insurance one, the accounting literature has shown that managers use this discretion, even coming to earnings management policies. The paper aims to verify if this behavior is confirmed in the insurance sector. The analysis deals with the UK and Italian insurance listed companies, looked through their 2005-2007 IFRS-compliant consoli-dated financial statements.