Major accounting change for global reinsurer

Zurich-headquartered Swiss Re Group has decided that its consolidated financial statements will be prepared in accordance with International Financial Reporting Standards (IFRS) from 1 January 2024.

The group is currently preparing its statements in accordance with US Generally Accepted Accounting Principles (US GAAP) and will continue to do so for periods ending on or prior to 31 December 2023.

Although the US GAAP as promulgated by the Financial Accounting Standards Board (FASB) and IFRS as promulgated by the International Accounting Standards Board (IASB) are both global scale frameworks of financial reporting, they have more similarities than differences for most common transactions.

In fact IFRS is largely grounded in the same basic principles as US GAAP, said a report from consultancy EY on the similarities and differences between the two. The general principles and conceptual framework in both are often the in both sets of standards and lead to similar accounting results.

The existence of any differences and their materiality to an entity’s financial statements depends on a variety of factors including the nature of the entity, the details of the transactions, the interpretation of the more general IFRS principles, industry practices and accounting policy elections where US GAAP and IFRS offer a choice.

For example in the insurance sector, under US GAAP, contracts with insurance companies (other than purchases of annuity contracts) should be accounted for as investments and measured at fair value. However, under IFRS, the fair value of insurance policies should be estimated using for example a discounted cash flow model with a discount rate that reflects the associated risk and the expected maturity date or expected disposal date of the assets.

Source: Asia Insurance Review