IFRS 4—the current accounting standard for insurance contracts—allows insurers (under certain conditions) to keep using the existing GAAP. The use of GAAP accounting standards was originally permitted because no comprehensive accounting standard for insurance contracts was ready in 2005, when IRFS reporting requirements began.
Recently, the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) have undertaken a new effort to develop comprehensive insurance accounting standards. Following a first exposure draft in 2010, a re-exposure draft was published by the IASB in June 2013. The final standards could be published by early 2015, and insurers will then get approximately three years’ time to get ready for the first-time application.
This paper reviews the main characteristics of the proposed IFRS with special attention to the new elements in the 2013 re-exposure draft.