IASB revised Exposure Draft marks major milestone toward global reporting consistency for insurers

LONDON, June 20, 2013 /PRNewswire/ -- Ernst & Young today welcomes the International Accounting Standards Board's (IASB) revised exposure draft Insurance Contracts (the revised ED). The revised ED is part of the IASB's ongoing insurance contracts project and another key step on the road to global consistency of financial reporting by insurance companies.

The Board has put much effort into addressing the issues raised around its previous proposals from July 2010, including major concerns for increased earnings volatility and changes in the presentation of the statement of comprehensive income. Furthermore, the IASB seems determined to complete this project considering today's issues with the existing accounting standard on insurance contracts.

The revised ED has been developed through joint discussions with the Financial Accounting Standards Board (FASB).  However, at this stage, there is no expectation that the two Boards ultimately will fully converge on their proposals, and the FASB will issue its own exposure draft shortly. 

Implementation model brings broader focus on finance change agenda

David Foster, Ernst & Young Partner and Insurance Finance and Accounting Leader, comments: "The proposals aim to mitigate the potential for earnings volatility, bring consistency and a better understanding of how companies account for insurance contracts. However, these proposals also bring potentially significant operational challenges and introduce more complexity."

Foster adds: "Companies will need to look at the proposed model for insurance liabilities in the context of the broader, shifting reporting landscape. When considered alongside other financial and regulatory reporting changes, and continuing economic and cost pressures, the challenge for finance functions in the coming years will be substantial. While the effective date of a final standard is unlikely to be before 2018, the work needed to prepare should not be underestimated."

Richard Lynch, Chair, Ernst & Young Global Insurance Technical Group, comments:  "This may be the last time insurers have an opportunity to comment on the proposals. Insurance companies will need to understand the impact on financials and business operations to provide effective feedback, and help the Board in shaping the final standard. Insurers and users face a huge task in reaching this understanding within the upcoming four-month comment period."

Lynch concludes: "If all goes well, we hope to see the final standard in 2014. And while the IASB has responded to the industry's requirement to allow ample time to implement, companies will need to take advantage of the 'run up' to effectively assess and plan for the changes ahead. In our view, insurers should start looking at the implications now."

For more details about this major milestone, refer to our special insurance accounting alert which will be on: www.ey/insurance.com

About Ernst & Young's Global Insurance Center
Insurers must increasingly address more complex and converging regulatory issues that challenge their risk management approaches, operations and financial reporting practices. Ernst & Young's Global Insurance Center brings together a worldwide team of professionals to help you achieve your potential — a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately it enables us to help you meet your goals and compete more effectively. It's how Ernst & Young makes a difference.

About Ernst & Young  
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. 

This news release has been issued by Ernst & Young LLP, a US client-serving member firm of Ernst & Young Global Limited.

For more information, please visit www.ey.com 

SOURCE Ernst & Young

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