Insurers continue to vent dissatisfaction that they are not being heard as decisions on international accounting standards take shape.
During a recent forum on fair value accounting standards sponsored by New York-based TIIA-CREF, Paul Volcker, chairman of the trustees of the International Accounting Standards Committee and former chairman of the Board of Governors of the Federal Reserve System, was made aware that insurers feel they are not part of the process to develop accounting standards they would be required to follow.
Insurers do not have the access to the International Accounting Standards Board that banks have been afforded, contended Doug Barnert, president of Barnert Global, Ltd., New York.
Additionally, Barnert expressed concern that insurers are being disadvantaged by a lack of openness under the current process. “It is a board that is theoretically open but is really closed in many ways,” Barnert said.
For instance, he noted that unlike the open educational sessions of the Financial Accounting Standards Board, Norwalk, Conn., which establishes U.S. accounting standards, IASB board educational sessions are closed.
Additionally, he continued, insurers can submit comment letters and documents, but often decisions are made before there is a chance to read and comprehend them thoroughly.
Volcker said he “resists the notion” that the board is more concerned about banks than insurers.
There is enormous pressure, he explained, for the IASB to prepare standards to meet deadlines established by the European Union commission.
Those standards take a fair value approach to accounting. Fair value, as described by Douglas Fore, assistant director and senior research fellow at TIAA-CREF Institute in a May 2003 research paper, is “the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arms length transaction. In particular, the fair value of a liability is the amount that the enterprise would have to pay a third party at the balance sheet date to take over the liability.”
As Fore explains in his report, life insurance industry concerns caused the IASB to take a two-phase approach to the project: one that starts in 2005 and a second phase beginning in 2007. A release of the exposure draft on Phase I of the project is anticipated for 2004 with implementation in 2005, the report continues. However, since the report says two years of comparative data would be required, fair value results would need to be reported by year-end 2003.