29 July 2013

FRC: Proposal to update UK GAAP for insurance

The FRC has issued a draft new UK accounting standard for insurance (FRED 49: Draft FRS 103 Insurance Contracts). The proposals rationalise existing UK accounting provisions for insurance rather than establishing new requirements.

Draft FRS 103 follows on from the 2012 Discussion Paper 'Insurance Accounting - Mind the UK GAAP' and applies to those entities applying FRS 102 that have insurance contracts, life and general insurers including mutuals and non-listed subsidiaries of listed entities. The draft Implementation Guidance accompanying draft FRS 103 is drawn from the existing FRS 27 Life Assurance and the ABI's Statement of Recommended Practice. The FRC expects little change in accounting by entities within their scope.
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.

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. We believe that draft FRS 103 and its accompanying Implementation Guidance does this by consolidating several standards and pieces of guidance for insurance contracts.  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. The FRC stresses that these developments are distinct from the IASB's current proposals on insurance contract accounting. The FRC will only consider international developments and their potential adoption in UK GAAP when there is much more certainty about the outcome of the IASB's work.

Press release

Draft FRS 103 (Insurance Contracts)

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