Accounting for intangible assets in the insurance sector:the UK and Italian listed companies’ policies

In the insurance sector the accounting for intangible assets receives a unique treatment – in particular when their recognition is due to business combinations – and unusual account-ing discretionary choices are allowed. Hence, the analysis on the reliability of the insurance sector-related intangible assets has to consider the insurers’ accounting model distinctiveness and the connected discretionary choices. In this respect, the paper: i) aims to designs a map of the intangible assets recognized by Italian and UK listed in-surers and highlights the ways such insurers comply to the requirements of the IFRSs that rule the accounting for intangibles. Besides, the paper allows to judge the disclo-sure offered in their consolidated reports and it can be useful for standard setters and other government and non-government bodies and entities interested into the insurers’ financial reports relevance and reliability; ii) explains how the international insurance sector-related accounting standard – i.e. IFRS 4 “Insurance Contracts” – actually drives the recognition and measurement of the eco-nomic benefits arising from insurance contracts transferred in business combinations (henceforth BC). The distinctiveness of the insurance sector about the recognition of the intangible assets acquired in BC is underlined. The results of the analysis can be considered by the accounting standard setters that are now engaged in the definition of a new accounting model for the insurance contracts; iii) considers the accounting literature that shows that earnings management (henceforth, EM) policies occur when intangible assets are recorded in the purchase price allocation (henceforth PPA) of a BC. This literature demonstrates that EM policies occur when in-tangible assets are recorded in the purchase price allocation (henceforth PPA) of a BC. In particular, some scholars reveal both that intangible assets represents assets for which managers have discretion in the PPA and that the managers use such discretion to avoid future impairment losses. These scholars identifies the so-called “firm charac-teristics” – e.g. the extension and the number of the CGUs to which the purchase price is allocated as well as the market-to-book ratio of the shares of the buyer before the ac-quisition – that (are considered to) offer significant discretion in the manipulation of the impairment test and demonstrated correlations between such characteristics and PPA choices (Ramanna & Watts, 2007). Hence, we use the correlation hypotheses developed in the other sector studies about intangible assets, BC and PPA with the aim to enrich the literature about EM in insurance sector by highlighting the accounting policies car-ried into effect by Italian and UK listed insurers. L’obiettivo è quello di dare un contri-buto all’ampliamento sia degli studi sulle risorse immateriali – avuto particolare riguar-do a quelle che trovano iscrizione nel bilancio assicurativo in occasione di BC –, sia delle ricerche che indagano la presenza di politiche di bilancio in ambito assicurativo. Rispetto a queste ricerche, il focus dell’analisi è spostato dalle poste tipiche del settore (i.e. le insurance liabilities) a quelle prevalentemente movimentate in occasione di ope-razioni di BC (in particolare, goodwill e other indefinite useful life intangibles).