International Financial Reporting Standards ("IFRS/IAS")
implementation for an insurance company
The Issue
In order to comply with the EU requirements to issue
consolidated financial statements under the IFRS/IAS
framework as at December 31, 2005 with comparative
figures as at December 31, 2004, a major Luxembourg
based insurance company initiated a project aiming
at implementing a financial reporting process according
to IFRS/IAS rules. This project was considered particularly
challenging, as it required actuarial, financial and
systems expertise.
The scope of the project included issues such as:
- Contracts classification under IFRS 4,
- Embedded derivatives in insurance contracts,
- Reinsurance accounting under IFRS 4,
- Staff group life covers under IAS 19,
- Deferral of insurance acquisition costs under
IAS 18,
- "Unbundling" of unit-linked product
offering additional benefits,
- Impairment testing on the investment portfolio,
- Provisions recognition under IAS 37,
- And IFRS deposit accounting for contracts regarded
as investment contracts.
Our Approach
In order for the client to benefit from our experience
and expertise in the IFRS/IAS area, we performed an
initial review of the potential impact of the implementation
of IFRS/IAS standards on the financial statements
of the Company and highlighted the main differences
between the accounting principles currently used by
the Company and those required under IFRS. Then, we
identified the significant accounts that would require
adjustments to comply with IFRS.
A joint team composed of both accounting and actuarial
specialists was set up to deliver value added recommendations
as to potential accounting issues and options to be
validated at Group Level and as to the impact of certain
accounting options on IT systems requirements.
In parallel, potential plans for action were determined
for all key issues identified.
The Outcome
The outcome of the project was a successful and timely
analysis of the IFRS/IAS reporting framework including
the early treatment of all significant issues. This
enabled the company to evaluate the impact of the
IFRS/IAS implementation on its current financial,
reporting and IT processes and to prepare appropriate
action plans with a view to compliance with the Group's
IFRS consolidation requirements.
