IFRS 4 Presents Opportunities for Global Insurance Industry

Manila Bulletin, August 18, 2010 | Go to article overview

IFRS 4 Presents Opportunities for Global Insurance Industry


SGV & Co. welcomed the long-awaited Exposure Draft on Phase 2 of International Financial Reporting Standard (IFRS) 4 Insurance Contracts issued last July 30, adding that there is now real potential for insurance companies to include IFRS into their wider implementation programs for economic capital management and finance transformation.

The IFRS 4 Exposure Draft, which has been in development for a decade now, was published by the International Accounting Standards Board (IASB). When transitioned into a standard in 12 months' time, it will replace a confusion of grandfathered generally agreed accounting principles (GAAPs) with a single IFRS for all insurance contracts. To date, insurers have been relying on the GAAP of their individual countries or on elements of US GAAP.

SGV Partner Medel T. Nera, head of SGV's financial services organization, comments: "IFRS 4 will create a level playing field for the insurance industry, since it will provide all financial statement users and preparers with greater comparability and transparency about performance as a direct result of consistent measurement and presentation models brought by the standard. There will be a consistent financial reporting structure for the industry. The standard has been long-awaited and it is essential that the industry takes part in the critical four-month consultation period ahead.

IFRS 4 will surely pose significant implementational challenges to the insurance industry. It is therefore important that players in the industry take a keen interest in the Exposure Draft and actively participate in the ensuing discussions in the months ahead," says Nera.

Nera adds: "Implementing the new IFRS standard is likely to be a complex process for insurers but there will be important milestones to meet in the next few years. However, with everyone playing by the same rules in future, implementing IFRS 4 is likely to be a short term pain for a much longer term gain. The benefits to the industry and the wider financial community cannot be underestimated. …

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