International accounting standards

Document description

The International Accounting Standards Board has issued an exposure draft, ED5, on Phase 1 of its insurance accounting project. This covers almost everything except how insurance assets and liabilities will be valued in Phase 2. A “fair value” approach is currently selected for Phase 2, but many important details remain as yet unresolved. The current plan is for companies to disclose fair values from December 2006 and to account using fair values for accounting periods starting on or after 1 January 2007. This paper reports briefly on the decisions on Phase 1, which are contained within ED5. It then attempts to find a relatively simple solution to the determining of market value margins, which are to be added to discounted mean estimated liabilities to arrive at a “fair value” of insurance assets and liabilities. The working party does not expect these proposals to produce a consensus, but does hope that making them will generate constructive discussion towards the eventual implementation of Phase 2.