Odomirok.24-IFRS
International Financial Reporting Standards (IFRS) are global reporting standards from the International Accounting Standards Board (IASB).
Study Tips
Spend no more than 15 minutes on this reading. (If you memorize just 1 thing, memorize the IFRS definition of insurance contract.)
BattleTable
- this reading has not been tested on any exam from the year 2012 to Fall 2019 when the exams stopped being published.
reference part (a) part (b) part (c) part (d) no prior questions
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In Plain English!
The first thing you have to know about accounting standards is:
- FASB promulgates GAAP
- IASB promulgates IFRS
Just in case you don't know:
- FASB = Financial Accounting Standards Board
- IASB = International Accounting Standards Board
FASB & IASB are cooperating to create financial reporting standards to:
- increase transparency & consistency among insurers operating in different countries
- align standards with company economics (versus regulatory prudence)
An important first step in this cooperation is the IFRS definition of insurance contract:
- a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder
Recall that in the U.S. insurance risk requires both underwriting risk and timing risk. Note however that IFRS does not require timing risk.
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