INSURERS FACED WITH ACCOUNTING CHANGES, SAYS MOORE STEPHENS

UK insurance accountancy firm Moore Stephens has warned that the European Union (EU) requirement that all listed companies must adopt Financial Reporting Standards by 2005 is likely to result in a requirement for more extensive disclosure of details about insurance contracts. According to Moore Stephens, some aspects of the EU’s Exposure Draft 5 remain contentious and could have significant ramifications for the insurance industry. ED 5 is derived from the work of the International Accounting Standard Committee (IASC) project on accounting for insurance contracts, and applies to all insurance and reinsurance deals. Due to time constraints, the IASB has proposed a two-step approach which will see assets being measured at fair value from 2005 along with all other industries — the first phase of the overhaul — while liabilities can remain amortised under national GAAP until 2007 (the second phase). “Phase one is an interim measure intended to fill the gaps in an industry where diverse accounting practices are widespread”, noted Moore Stephens partner Simon Gallagher. The issues relating to phase two are currently still being debated, and an exposure draft is expect in late 2004, with implementation slated to follow a year or two later. “The major change emanating from the proposed draft relates to disclosure, including information about estimated amounts, timing and uncertainty of cashflows relating to insurance contracts, as well as disclosure of the fair values of insurance liabilities and assets”, said Mr Gallagher.