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August 10, 2010

AASB issues insurance accounting draft

The Australian Accounting Standards Board (AASB) proposed to replace the three current Australian insurance contract accounting standards with a single standard.

AASB ED 201 Insurance Contracts proposes stricter rules in relation to accounting for profits and expenses arising from insurance contracts.

The proposal aims to improve consistency in existing practices and improve comparability across entities, jurisdictions and capital markets.

The new model would replace AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts.

AASB Chairman Kevin Stevenson said ED 201 would mean insurance companies would account for the costs incurred in selling insurance contracts the same way, making company results more comparable.

“Investors should be aware that profits may appear initially less attractive because of the selling expenses being recognised up front,” Stevenson said.

The AASB draft is based on the International Accounting Standards Board’s (IASB) draft insurance standard.

Comments are due to the AASB by 8 November or to the IASB by 30 November.

 

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