Hans Hoogervorst, chairman of the IASB, said the draft, published last week, represented the beginning of the end in an “important project to bring consistency and transparency” to insurance industry accounting.
“The document published today responds to concerns expressed about non-economic volatility resulting from our previous proposals,” he added, in a statement accompanying the latest draft.
"We are now seeking further feedback before finalising this much-needed standard.”
The 81-page, so-called Exposure Draft, which may be read and downloaded from the IASB’s website, is available for comment until 25 October.
Accounting industry convergence
The London-based IASB is best known – mainly to accountants and chief financial officers – for its role in creating the International Financial Reporting Standards (IFRS), which has been in use for the past decade by much of the world, apart from the US, to keep corporate accounts. Before it was created, different countries had different interpretations of accounting terms, making comparisons of the performances of companies operating in different countries difficult.
The latest draft of the IASB’s plan for insurers’ financial accounts builds on its original proposals which date back to 2010, and “reflects feedback received during the extensive public consultation period that followed”, the IASB said in last week’s statement.
Work on developing an international standard for insurance industry accounting dates back before 2010, however. In 2005, when it was putting the final touches on the IFRS in preparation for its adoption by the European Union and other countries, the IASB said it was introducing an interim standard (IFRS 4) “until a more comprehensive review of the accounting for insurance contracts could be completed”.
In 2007, the IASB launched the first phase of that comprehensive review with the publication of a “discussion paper”, which was subsequently followed by the 2010 Exposure Draft.
“The revised proposals [unveiled last week] aim to provide a consistent basis for accounting for insurance contracts, and to make it easier for users of financial statements to understand how insurance contracts affect an entity’s financial position, financial performance and cash flows," the IASB said.
“While the model presented in the 2010 Exposure Draft was broadly supported [by industry and outside commentators], some specific issues were raised that the IASB has sought to address.
"The revised proposals respond to those issues by introducing enhancements to the presentation and measurement of insurance contracts, while seeking to minimise artificial accounting volatility.”
