Stakeholders have widely welcomed the issuing of the International Accounting Standards Board’s (IASB) revised exposure draft (ED) on Insurance Contracts, however many stakeholders have warned against high complexity and implementation difficulties.
Last week, the IASB published for public comment the ED IFRS 4 Phase II: Insurance Contracts and IASB chairman Hans Hoogervorst said the project is close to completion.
Firms, professional bodies and regulators described IASB’s move as a ‘milestone’ to bring more consistency and a better understanding to insurance contracts accounting.
Gail Tucker, global accounting services financial instruments leader at PwC, said: "Insurers should welcome the revised exposure draft as a significant step towards achieving a single accounting model, which will enable better global comparability."
While welcoming the ED, Ernst & Young’s (E&Y) partner and insurance finance and accounting leader David Foster warned that the news standard will come with "significant operational challenges and more complexity".
"Insurers and users face a huge task in reaching understanding of the proposals within the upcoming four-month comment period," E&Y global insurance technical group chair Richard Lynch added.
PwC global insurance partner David Law said insurers will have to work closely with all stakeholders, "to make sure that they understand the impact of the significant changes being proposed".
In order to have a smooth transition and to prepare investors to the new reporting basis, Deloitte global IFRS insurance leader Francesco Nagari and KPMG global insurance advisory leader Gary Reader both called on insurers to take action now.
"If insurers start planning now, the wave of change could open up opportunities for synergies in areas such as data collection, modelling capability and investment in systems and resources," Reader said.