THE DISCOSURE OF RISK AND RETURN IN THE FINANCIAL STATEMENTS OF INSURANCE COMPANIES IN ITALY. The case of financial instruments

The paper is inspired by a general theme represented by the effects of the international accounting standards on the quality of information given in the financial statements and analyzes a case to support the theoretical argument: the chosen case is constituted by the Italian insurance companies listed. In order to make the application easily understandable for the reader, after a first paragraph which are briefly outlined the background reference work, the paper defines the dual system of accounting standards currently in force (by law no. 38/05) for the Italian insurance industry: local regulation mainly resulting from the implementation of Directive 91/674/EEC for individual financial statements and international accounting standards (IAS – IFRS) for consolidated financial statements. The paper then examines how the accounting rules applicable until October 2008 have impacted on the determination of operating and net return of insurance business and on the representation, at the end of the year, of the company risk and examines also how the changed market situation has required some adjustments in the accounting rules to remove possible areas of weakness in the system1. The amendments in question were made to meet a real need of the operators. However, the following difficult theoretical problem exists: once chosen should the accounting rules be applied regardless of changes in the economic political and social conditions or should they be adapted to circumstances – like financial crisis - in order not to cause not fair representations of losses? The change in accounting principle as an impact on the ability of financial statements to give an appropriate level of information