The Impact of International Financial Reporting Standards on Life Insurance Company''s Financial Statement

The idea of this paper comes from “Society of Actuaries’ Research Project on Financial Reporting for Insurance Contracts under Possible Future International Accounting Standards”, which compares the difference between US GAAP and IFRS in the income statement. This paper focuses on the comparison of the financial statement difference between SAP and IFRS.ven in the IFRS Discussion Paper, there still are some different opinions on the issue, and there’s no conclusion about which one is better. For example, should we recognize the Margin at the inception of the insurance contracts sold or should we recognize but depreciate it during the whole policy periods? To avoid confusing the readers by presenting too many different IFRS accounting approaches, we only adopt the Board’s preliminary views in this paper.irst we briefly introduce the difference between SAP and IFRS in the financial statement. Second we illustrate how to calculate the income statement and balance sheet items. Then we offer five numerical examples to show the income baselines and liabilities on the balance sheet under SAP and IFRS. Also we analyze the difference from the figures and offer some scenario simulations to discuss the impact of adopting IFRS on the higher pricing rate contracts. Finally, we summarize the result we found in this paper.lthough the IFRS is better than SAP, we still can’t change it right away. Because as our simulation shows, if we adopt IFRS this year, the liability the insurance company need to increase is about 1 to 2 times of their current liability. The only result is that all the life insurance companies will go bankrupt together, so it must need time and some modified methods to solve this critical problem.