IFRS

IFRS

In 1973, international accounting standards began to be developed when the accountancy boards of 10 countries founded the IASC (International Accounting Standards Committee). Subsequently, in 2000, the organization was restructured and was renamed the IASB (International Accounting Standards Board). The IASB adopted all of the standards that had been issued by the IASC and also issues its own standards. The terms “International Financial Reporting Standards” or “IFRS” used to refer the standards previously issued by the IASC and to the relatively recent standards issued by the IASB. (IASB, 2007)

The international business community is moving toward adopting IFRS. In the European Union, compliance with IFRS was required beginning in 2005. The potential use of IFRS for U.S. financial reporting could represent fundamental and far-reaching changes in accounting, not only for insurance contracts, but also for financial reporting by insurance companies. For instance, the use of IFRS requires more judgment, and less reliance on detailed rules, than GAAP currently used in the United States. Accordingly, given the move toward more conceptual, as compared to prescriptive, international financial reporting standards, auditing standards and professional conduct standards, it is important to understand how IFRS will impact the U.S. insurance industry, including the implications for financial accounting and reporting. (SEC, 2010)

The international business community is moving toward adopting International Financial Reporting Standards (IFRS). Accordingly, it appears likely that, sometime in the not so distant future, publicly traded companies in the United States will be required to adhere to IFRS for the preparation of financial statements instead of U.S. generally accepted accounting principles (GAAP). The SEC called for additional study on IFRS, with a vote in 2011 on whether to move ahead with a mandate to use IFRS in the United States as early as 2015.

Moreover, the SEC has stated that IFRS are in the ...