The Financial Reporting Council (FRC) has issued a new draft UK accounting standard for insurance which consolidates several existing standards and pieces of guidance.
The FRC says that the draft standard, FRS 103, Insurance Contracts builds on the current global standard while retaining UK insurance accounting practices. It is distinct from the proposals on insurance contract accounting currently being considered by IASB, and the FRC says it will only consider adopting international standards in UK GAAP when there is much more certainty about the outcome of the IASB's work.
Draft FRS 103 applies to those entities applying FRS 102 that have insurance contracts; life and general insurers including mutual; and non-listed subsidiaries of listed entities. Other entities which are not regulated insurance businesses but which have contracts meeting the definition of insurance will need to apply certain aspects of draft FRS 103.
The accompanying draft implementation guidance is drawn from the existing FRS 27 Life Assurance and the Association of British Insurers' (ABI) statement of recommended practice, both of which the FRC says it expects to be withdrawn once draft FRS 103 is effective. The FRC expects little change in accounting by entities within their scope.
Roger Marshall, chair of the FRC's accounting council said: 'The FRC aims to provide succinct financial reporting standards, which have consistency with international accounting standards unless an alternative is clearly better, reflect up-to-date thinking and developments in the way entities operate and the transactions they undertake; and balance consistent principles with practical solutions.
'At the same time we have been mindful of the importance of not imposing multiple changes in accounting and reporting for insurers in quick succession.'
The FRC is issuing the draft now so that it can be finalised in time for the wider mandatory implementation of UK GAAP by 1 January 2015. Consultation on the proposals will last for three months and close on 31 October 2013.
The Exposure Draft is available to download from the FRC.
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