PwC Examines Insurers Reporting Under IFRS

Many insurers are providing more disclosure in moving to International Financial Reporting Standards (IFRS), but their varied formats makes comparing company results difficult, an accounting firm reports.

That assessment came from PricewaterhouseCoopers LLP in London after a study of 26 large companies representing different insurance sectors in a range of countries.

The European Union's IFRS commenced on Jan.1, 2005, on an interim basis for insurers, with a harmonized standard for the valuation of liabilities still needing to be put in final form.

PwC said the fact that many companies have gone beyond the minimum of disclosure required to comply with IFRS is evidenced by the sheer weight of their recently published financial statements.

According to the study, U.K. insurer statements bulked up the most, showing an increase in excess of 100 percent.

However, while the accounts are considerably longer and provide valuable new information for users, PwC said that in some areas “the wide degree of discretion in presentation has made accounts harder to compare.”

The survey also found that many of the financial statements tended to be less clear and harder to follow than before as a result of the experimentation in implementing some of the changes and the different approaches taken with regards to presentation.

“The latest changes represent the most significant shake-up in financial evaluation and reporting for the insurance industry in recent times,” according to Alex Finn, a PwC partner. “The huge increase in the length of the new accounts is testament to the amount of extra work involved. And yet, there is a great deal more work to come, given that IFRS is still only at an interim stage for insurers and a harmonized standard for the valuation of liabilities has yet to be finalized.”

He said the survey emphasizes the importance of insurers working together “to enhance the clarity, consistency and usability of their financial statements, especially in areas where the new regime leaves insurers substantially free to choose the nature or format of presentation.”

PwC said that with the exception of the valuation of insurance liabilities and the corresponding impact on investment asset classifications, the survey found relatively little other diversity in accounting policy, but in some cases saw surprising diversity in detailed disclosures.

In some areas that were expected to result in considerable financial reporting changes–such as segmental disclosures and the consolidation of additional entities–the survey findings suggested there had been relatively little impact, apart from an additional disclosure at a segmental level.

PwC noted that the focus of its study has been the application of IFRS to insurance and investment accounting, rather than the broader impact of IFRS across all aspects of insurers' financial reporting.