In July 2010, a draft of revised IFRS 4 was published. IFRS 4 contains International Financial Reporting Standards (IFRS) provisions relevant to the way insurance contracts are accounted for. After the public review period ends, the International Accounting Standards Board (IASB) will review the comments submitted by industry, regulators and investors and will work on revising the draft.
The published draft will fundamentally change how insurance contracts are accounted for. Even though its principles are similar to those of Solvency II, it must be expected that the introduction of this standard will be associated with substantial additional conversion costs for the insurance industry.
In addition, the criticism must be made that these accounting rules, as currently available in draft form, will bring with them significant challenges to readers of balance sheets, both as regards the presentation of consolidated financial statements and the impact on annual operating results (high volatility).
The plan is for a final IFRS 4 standard to be published at mid-year. Subject to approval by the EU, it is assumed that the new accounting rules will not take effect until 2013. The Managing Board of the Vienna Insurance Group is monitoring these developments and will begin to prepare for implementation of the final standard promptly upon its publication.