IASB launches insurance shake-up

The IASB has
opened up consultation on a new standard that could revamp the way complex
insurance contracts are reported in financial statements.

The current standard, IFRS 4, was brought in as temporary measure for the
initial IFRS transition, but it does have weaknesses which the IASB will now
attempt to iron out.

‘The disclosure requirements in our existing standard, IFRS 4 Insurance
Contracts, shone some light into this area of accounting, but IFRS 4 is only an
interim standard and permits a wide variety of accounting practices for
insurance contracts.

‘Many of these practices make it difficult to understand insurers’ financial
statements and differ from those used in other sectors,’ said IASB member

The public consultation will last for a period of six months and will aid the
IASB in developing firm proposals for an exposure draft to be published towards
the end of 2008. Allowing for a further period of public consultation, the IASB
expects the new standard to be in place in 2010.

partner Alex Finn welcomed the discussion paper.

‘Insurance accounting currently labours under too many diverse accounting
standards, which cost the industry in terms of raising finances and capital. The
IASB’s move towards a single global accounting standard for insurance is an
important step,’ Finn said.

Further reading:

Insurance sector warned of IFRS volatility

IFRS work is only half done, says Aviva

IFRS update December 2005 – Phase two

Related reading

Fiona Westwood of Smith and Williamson.