IFRS work is only half done, says Aviva
Future will prove just as tough as 2005 switch claims insurance giant
Insurance giant Aviva has said it faces just as much work to adopt future
changes to IFRS on insurance contracts as it did during its initial switch.
The company, which released its first interim results under IFRS last month,
admitted that, due to the two-phase nature of IFRS4, it only had to change the
accounting treatment of 17% of its life insurance business and none of its
general insurance business.
‘We believe the second instalment of IFRS for the insurance sector will be as
big as the first instalment,’ said Nic Nicandrou, group financial control
director at Aviva.
‘We still have all of our general insurance, and 83% of our life insurance
that will need to be looked at for the first time.’
As a result, the company, along with the rest of the insurance industry,
faces a huge task when an updated and more comprehensive version of IFRS4 is
brought in to force in the next few years.
‘Everybody is in the same boat on this,’ said John Breckenridge, acting head
of taxation and accounting at the Association of British Insurers.
‘We don’t yet know what the standard will look like, but it could be
considerably different from current accounting practice and require significant
work and change.’
IFRS4 allows insurance companies to largely carry on using their previous
accounting treatments until the International Accounting Standards Board can
agree on how insurance contracts should be universally accounted for.
A final standard is not expected to be implemented until 2008 or 2009, but
Aviva finance director Andrew Moss admitted that the company was already
preparing for this event.
‘You need to start early on it, you need to influence the development of the
standards and we play a very active role in that,’ said Moss.