Accountancy body criticises proposed insurance reporting

The Institute of Chartered Accountants in England and Wales (ICAEW) has criticised plans to force UK financial services firms to include “economic cycle reserves” in their financial reporting, the FT reports.

It could end up “obscuring the true financial position of UK PLCs and distracting investors,” the ICAEW says.

It supports the idea of countercyclical capital buffers, which increase bank capital requirements in good times while reducing them in bad times.

But it opposes including cyclical provisioning in profit and loss statements on the grounds that it will be harder to investors to gauge the underlying financial strength of companies.

Insurers used to use such a technique but dropped it as part of new standards adopted in 2005.

The International Accounting Standards Board is also looking at this issue and plans to put forward proposals in October.