FRC issues new accounting standard for insurance contracts
News types: Codes and Standards Announcements
Published: 20 March 2014
PN 013/14
The FRC today published new accounting and reporting requirements for entities with insurance contracts, set out in FRS 103 Insurance Contracts (PDF). The new requirements apply to companies that apply FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (PDF) as the basis for their accounting and therefore FRS 103 adds to new UK and Irish GAAP.
Together, FRS 103, which was developed from relevant IFRS, and the accompanying non-mandatory Implementation Guidance (also issued today), consolidate existing UK and Irish financial reporting requirements and guidance for insurance contracts. As a result FRS 103 allows entities, generally, to continue with their current accounting practices for insurance contracts, but permits entities the same flexibility to make improvements (subject to legal and regulatory requirements) as entities in the UK and Republic of Ireland that apply IFRS. The suite of new UK and Irish accounting standards improves financial reporting for financial instruments, which will lead to some changes for insurers.
The FRC expects FRS 103 to provide an interim solution while the IASB completes its project to revise accounting for insurance contracts. The FRC, therefore, expects to review FRS 103 and consult on any proposed changes after the IASB has completed its project, although the exact timing of this review has yet to be determined.
Roger Marshall, FRC Board Member and Chair of the Accounting Council said:
“We are issuing FRS 103 to fill a gap in UK and Irish accounting standards for those entities applying FRS 102 that have insurance contracts. We recognise that there are forthcoming changes to the regulatory framework for insurers, as well as on-going work internationally on financial reporting for insurance contracts, and as a result we are allowing entities, generally, to continue with their existing accounting policies for the time being. We expect to revisit this topic in a few years’ time, to consider whether changes to FRS 103 are desirable in response to regulatory or international accounting developments.”
Notes to editors:
- The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
- FRS 103 (and the accompanying Implementation Guidance) is based on the International Accounting Standards Board’s (IASB) IFRS 4 Insurance Contracts extant in 2013 (except to the extent that it was amended by IFRS 13 Fair Value Measurement), the requirements of FRS 27 Life Assurance (prior to it being withdrawn by FRS 103) and elements of the Association of British Insurers’ Statement of Recommended Practice on Accounting for Insurance Business (the ABI SORP) (published in December 2005 and amended in December 2006).
- FRS 103 was consulted on in FRED 49: Draft FRS 103 Insurance Contracts issued in July 2013. An impact assessment and feedback statement is also issued today.