U.S. insurers need to be more proactively involved in shaping future requirements, says one accounting expert in response to a recent proposed Securities and Exchange Commission rule that would exempt foreign private issuers from reconciling their financial statements with U.S. generally accepted accounting principles.
In a recent interview with National Underwriter, Mark Freedman, a principal with Ernst & Young Insurance and Actuarial Services, New York, said, “This is a wakeup call to insurers. The industry ought to consider the impact of where the U.S. is headed.”
Freedman was referring to a July 2 proposed regulation issued by the SEC titled, “Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance With International Financial Reporting Standards without Reconciliation to U.S. GAAP.” The proposed rule requests comments by Sept. 24, 2007.
Both life and health and property-casualty insurers have been monitoring the activities of the International Accounting Standards Board, London, and the Financial Accounting Standards Board, Norwalk, Conn. Both of these organizations have put out requests for comment about ongoing work to converge accounting standards in order to make them more seamless internationally. The comment period for these groups ends Nov. 16, 2007.
Additionally, life and p-c trade groups have been voicing their concerns at quarterly meetings of the National Association of Insurance Commissioners, Kansas City, Mo.
Freedman says that the work of the IASB and the recent call for comment from the FASB about whether it should work with the IASB to create new standards in conjunction with the SEC proposed rule, is a sign of the direction that accounting regulators are taking.
Consequently, he says, U.S. insurance companies need to offer input and to prepare their own accounting operations for potential changes.
By 2010-2011, European companies and companies operating in Europe may be required to comport with changes being contemplated by the IASB.
At an absolute minimum, companies need 2 years’ lead time to get ready for such accounting changes, he continues, because they need to test the new requirements and compute results under the new system.