The Accounting Standards Board yesterday issued proposals intended to improve the ‘clarity and transparency’ of the financial statements of organisations with life assurance business.
‘It’s a very tall order,’ said Peter Vipond, head of financial regulation and taxation at the Association of British Insurers. ‘If you realise how complex the reporting is, the requirements of the ASB are just going to be too much for some groups.’
He said that firms could be ‘forced to delay the publication of their annual reports because of changes’, and that some reports may have to be based on just ‘nine months of with-profits data’.
The ASB was acting on the orders of Ruth Kelly, financial secretary to the Treasury, who demanded a review of the status quo following this year’s publication of the Penrose report on Equitable Life.
The standards are likely to be the last major project that current chairman Mary Keegan will oversee before leaving for a job at the Treasury.
The proposed changes mean that companies will have to make a new realistic calculation of their expected policyholder liabilities and apply them to December year ends and onwards.
‘It does seem unwise to introduce additional, radical changes to UK GAAP at the same time [as having to implement international accounting standards],’ said Sue Winston, spokeswoman for the UK’s biggest insurance group Aviva. ‘We think doing that could create confusion and could undermine the consistency of insurance communications.’
The ASB has requested comments on financial reporting exposure draft 34 by 8 October at the latest, but Simon Peerless, project director at the ASB, asked for an ‘early response’ as the ASB ‘is well aware that companies need to know where they stand’.
Peerless went on to say that the ASB’s hands were tied because of the IAS 2005 deadline. ‘Were it not for that then they could have taken a bit more time over them,’ he said.
An ASB statement said: ‘The board fully appreciates the practical issues that implementation of these proposals in 2004 may present.’
Full copies of FRED 34 can be downloaded at www.frc-asb.org.uk
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