Insurance industry groups and accounting experts say they need to know more before they can weigh in on U.S. Securities and Exchange Commission efforts to adopt international accounting standards.
The SEC recently released a proposed “road map” for moving toward single set of international accounting standards.
Insurance industry participants interviewed about the standards effort are expressing support for the concept but say they are waiting for more information about what the effort would really mean.
The SEC says it could decide whether to adopt the International Financial Reporting Standards by 2011, and that it could require some big issuers to use the standards as early as 2014. Midsize companies could be using the standards by 2015, and small companies could be using the standards by 2016.
About 85 countries now require domestic companies to use the IFRS, SEC officials report.
The American Council of Life Insurers, Washington, has issued a statement saying it looks forward to seeing the actual details of the SEC’s IFRS road map proposal.
The IFRS proposal would affect financial reports prepared in accordance with the Generally Accepted Accounting Principles rather than with the statutory accounting rules that help regulators monitor insurers’ solvency, according to the ACLI.
The project is still too new for the ACLI to determine how it might affect the insurance industry, but the ACLI believes “establishing a strong, global set of accounting standards for public corporations would be a welcome development,” the group says.
Doug Barnert, executive director of the Group of North American Insurance Enterprises, New York, says the GNAIE supports “a single, robust, high quality set of accounting standards.”
Today, however, there are many ifs surrounding the project, Barnert says.
Although the proposal would have a direct effect on U.S. GAAP, rather than on statutory accounting rules, a change that affects GAAP users could affect use of statutory accounting rules, Barnert says.
GAAP changes also could change the effect of the Codification of Statutory Accounting Principles prepared by the National Association of Insurance Commissioners, Kansas City, Mo., Barnert says.
Lisa Filomia-Aktas, a partner with Ernst & Young L.L.P., New York, warns that large companies that start filing in accordance with the IFRS in 2014 would have to prepare comparable IFRS filings for 2012 and 2013 as well as for 2014.
Examining assets and liabilities and deciding what should be on and off the balance sheet would take a great deal of work, Filomia-Aktas says.
Because a conversion could be so arduous, and could affect matters other than accounting decisions, the companies that could be the early IFRS adopters should begin preparing for the shift very soon, Filomia-Aktas says.