Aviva FD downgrades IFRS to back EEV standard

Aviva finance director Philip Scott has shot down claims that alternative
standards used by the insurance giant do not match the reporting clarity of

Investors had argued that the European Embedded Value standard (EEV) used by
the insurer had little benefit, but Scott shot back: ‘The insurance business,
and particularly the long-term savings insurance business, is about future cash
flows and the value in the enterprise is all connected up with these. EEV
provide a systematic approach to how those cash flows are assessed.’

Tim Harris, Aviva’s group chief accountant said: ‘IFRS applies a different ”
lens” to our business with a completely different accounting model to EEV. For
external reporting and performance management we focus on EEV.’

Under IFRS, revenues from investment contracts (insurance contracts with
earnings yet to be accrued) do not appear on the balance sheet and are not
recognised until the revenues actually come in. As a result, supporters of EEV
rules argue that more detail can be provided on the value of contracts with
future expected revenues.

City experts have described insurance contract figures reported under IFRS as
‘misleading’. With regards to businesses, which were entering into investment
contracts, one analyst said: ‘It is inappropriate to punish businesses which are
growing fast.’

Harris added: ‘EEV shows the value created for shareholders. It provides
valuable information to the users of our accounts.’

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