The International Accounting Standards Board (IASB) must move swiftly overhaul insurance accounting to avoid chaos among insurers. That's the stark warning from an influential European finance group.
The European Financial Reporting Advisory Group (EFRAG) said yesterday that delays in the process would lead to problems for insurers.
The comments were made in response to the IASB's draft proposals for insurance accounting, which demands accounting standards for insurers on a fair-value basis by 2007.
The IASB proposed a two-step approach whereby assets will be measured at fair value from 2005 but liabilities remain at an amortised basis until 2007.
However insurers vigorously oppose this two-step approach, saying it will lead to a mismatch between assets and liabilities and provoke volatility.
Insurers also fear that, if adopted, the IASB's plans would mean premiums received would not be booked to the profit and loss account, and therefore would decline significantly.
If the dispute between the IASB and insurers persists, it could threaten the EU's plans for comprehensive accounting standards from 2005.
