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The Actuary The magazine of the Institute & Faculty of Actuaries

Accounting gets exciting

Few actuaries will have missed the publication at the end of March of new international accounting standards, constituting a set of changes to IAS39 dealing with financial instruments and a new International Financial Reporting Standard (IFRS) 4 dealing with insurance contracts. Some US actuaries have described these as a ‘full employment guarantee for the actuarial profession’!

The new standards remain highly controversial, at least in Europe, mainly because of their potential to disclose the impact of market volatility. The principal division of opinion appears to be between French financial firms and what they see as an Anglo-Saxon standard-setting process. It seems unlikely, however, that the European Commission will support those banks and insurers resisting transparency. HSBC was quick to announce its intention to implement the draft revised IAS39.

IFRS4 is clearly acknowledged to be an interim standard, pending full fair value accounting for insurance contracts likely to come in 2008. Although most actuaries appear willing to live with its imperfections (especially different valuation bases for assets and liabilities), we did hear as we went to press that some European actuarial associations had voted symbolically against endorsing the new standard.