The Informativeness of Uncertainty Analysis Disclosure Under TFAS No. 40 in the Insurance Industry

Aiming to provide a confidence interval of the point estimate of reported accounting performance measures, uncertainty analysis disclosure is usually considered to contain valuable information (IASB, 2010; CFO Forum, 2009), However, little empirical evidence has been documented. As the first to examine the relevance of such disclosures, we examine the mandatory disclosures of Taiwanese insurance companies during the period 2011–2014 and find a positive relationship between the absolute values of earnings effects due to changes in actuarial assumptions and the insurers' earnings change in the subsequent periods. In addition, because the risk management committee is responsible for formulating and implementing the risk management policies of an insurance company, we predict and find that the informativeness of the uncertainty analysis disclosure is improved by the quality of the risk management committee, measured by the committee size and the attendance of the committee members. Our findings provide critical insights for regulators when applying the International Accounting Standards