Page 78 - Continental Reinsurance 2022 Annual Report

76 Statement of Significant Accounting Policies
are mainly analysed by underwriting year, by type and
line of business and by geographical territory. Estimated
premium income information is also used to supplement
the results of this technique
2.4 Significant accounting judgements, estimates and
assumptions (continued)
Additional qualitative judgement is required as
significant uncertainties remain such as future changes
in inflation, economic conditions, foreign exchange
rates, industry developments and operational process.
The carrying value at the reporting date of pipeline
receivables for the Group is N24,755,752,000 (2021:
N13,733,327,000) and Company N11,952,129,000
(2021: N5,909,022,000).
Deferred tax assets and liabilities
Uncertainties exist with respect to the interpretation of
complex tax regulations and the amount and timing of
future taxable income. Differences arising between the
actual results and the assumptions made, or future
changes to such assumptions, could necessitate future
adjustments to tax income and expense already
recorded. The Group establishes provisions, based on
reasonable estimates, for possible consequences of
audits by the tax authorities. The amount of such
provisions is based on various factors such as experience
of previous tax audits and differing interpretations by
the taxable entity.
The carrying value at the reporting date of net deferred
tax liability for the Group is N234,192,000 (2021:
N229,665,000) and Company N347,243,000 (2021:
278,299,000). Further details on taxes are disclosed in
Note 9 to the financial statements.
Valuation of pension benefit obligation
The cost of defined benefit pension plans and other
post-employments benefits and the present value of the
pension obligation are determined using actuarial
valuations. The actuarial valuation involves making
assumptions about discount rates, expected rate of
return on assets, future salary increases, mortality rates
and future pension increases.
Due to the complexity of the valuation, the underlying
assumptions and its long-term nature, a defined benefit
obligation is highly sensitive to changes in these
assumptions. All assumptions are reviewed at each
reporting date.
Details of the key assumptions used in the estimates are
contained in Note 27 to the financial statements.
The carrying value at the reporting date of gratuity
benefit obligation for the Group is N1,115,108,000
(2021: N542,746,000) and Company N759,441,000
(2021: 384,408,000).
See note 27.2 on sensitivity analysis on retirement
benefit obligation.
Valuation of investment properties
The Group carries its investment properties at fair value,
with changes in fair value being recognised in profit or
loss.
The Group engaged an independent valuation specialist
to assess fair value as at 31 December 2022. A valuation
methodology based on discounted cash flow income
capitalization model was used.
The determined fair value of the investment properties
is most sensitive to the estimated yield as well as the
long-term vacancy rate. The key assumptions used to
determine the fair value of the investment properties
are further explained in Note 20 to the consolidated
financial statements.
The carrying value at the reporting date of investment
properties for the Group is N5,201,836,000 (2021:
N4,925,062,000) and Company N1,849,900,000
(2021:N1,826,200,000).
See note 20.2 on sensitivity analysis on investment
properties
Valuation of reinsurance receivables
Reinsurance receivables are recognised when due.
These include amounts due from dedants and brokers.
If there is objective evidence that the reinsurance
receivable is impaired, the group reduces the carrying
amount of the receivables accordingly and recognises
the impairment loss through profit or loss. The group
assesses that the receivables are impaired, using the
incurred loss model. By the incurred loss model, the
receivables are aged in various aging category ranging
from year 0 to year 3. Impairment is charged/(release)
according to the various age bands.
The carrying value at the reporting date of reinsurance
receivables for the Group is N46,562,280,000 (2021:
N31,333,426,000) and Company N19,234,086,000
(2021:N12,279,107,000).
2.5 New and amended standards and interpretations
The accounting policies adopted are consistent with
those of the previous financial period.
Standards and interpretations effective during the
reporting period
There are a number of amendments to accounting
standards that become applicable for annual reporting