IFRS Preliminary Views
Where are we now?
Where are we going?
By Tom Herget, FSA, MAAA

February, 2008

Who is Tom Herget?
 Executive Vice President, PolySystems, Inc.
 Practicing actuary for more than 35 years
 Former Governor, Society of Actuaries
 Current Director, American Academyof Actuaries
 Chief Editor, US GAAP for Life Insurers
 Co-Editor, Insurance Industry
Mergers & Acquisitions
 Involved with SoA and AAA response to“Preliminary Views”

Outline of Speech
1)
2)
3)
4)
5)
6)
7)
8)
9)

Insurance IFRS 1990–2007
Preliminary Views andExit Value basics
Things I likeThings I don’t like
Impacts on insurers
SoA Numerical Examples
Responses to IASB
Responses to FASB
Next steps( 5 minutes)(10 minutes)( 5 minutes)(10 minutes)( 5 minutes)(20 minutes)(20 minutes)( 5 minutes)( 5 minutes)

1. Insurance
IFRS 1990–2007

IASB
 International Accounting Standards Board

London-based, 14 members from 9 countries, staff} Insurance Working Group (IWG)} Works with FASB (U.S. Financial AccountingStandards Board)} Publishes}

 IAS (International Accounting Standards)
 IFRS (International Financial Reporting Standards)}

These are identical – IAS was published before IFRSIASB Insurance Project}

Those providing significant input:
 CFO Forum (European insurers)
 GNAIE (plus 4 companies from Japan)
 IAA (International Actuarial Association)
 IAIS (International Association of
Insurance Supervisors)}

Others with influence:
 IOSCO (International Securities Commissioners)
 Banks (they sell annuities)
 EU (European governments)
 SEC (Security & Exchange Commission)IFRS Insurance Project Objectives
 Reduce diversity of accounting

practices that currently exist for
insurance contracts
 Where possible, bring the accounting
more in line with other business sectors
 Increase users’ understanding of
insurance financial statements
 Help investors make decisions

IFRS Insurance Project – Phase I Phase I started in 1997
 2001 Draft Statement of Principles
 Phase I ended with IFRS4 in March 2004

Defined insurance} Revised IAS 39, guidance for investment products} Existing GAAP with additional disclosure and loss
recognition was permitted} Still allowed diverse practices}

 Applies to insurance contracts, notinsurance companies

IFRS Insurance Project – Phase II
Recent Timeline Phase II started mid-2004

IASB, IASB staff and IWG worked on a
discussion paper called “Preliminary Views”,
released in May 2007
} Comments due November 16, 2007
} About 150 replies} Board and staff to read all submissions}

2. Preliminary Views andExit Value Basics

“Preliminary Views” Document
 Main text – 150 pages
 Appendices – 80 pages
 Search for fundamental principles

underlying the accounting basis

Identify the Measurement Attribute Paragraph 93 “Exit Value”:

The amount the insurer would expect to pay
to transfer its remaining contractual rights
and obligations to another carrier.
} Similar to Fair Value}What is Exit Value?
 Measure insurance liabilities using threebuilding blocks:
1. Cash flows
2. Time value of money
3. Risk margins

Cash Flows (Paragraph 34)

are explicit(b) are as consistent as possible withobservable market prices(a)Cash Flows (Paragraph 34)

incorporate, in an unbiased way, allavailable information about the amount,
timing and uncertainty of all cash flows
arising from the contractual obligations(d) are current, in other words theycorrespond to conditions at the endof the reporting period…use allavailable information(c)Cash Flows (Paragraph 34)(e)Exclude entity-specific cash flows.
Cash flows are entity-specific if theywould not arise for other entities
holding an identical obligation(f)

In addition, paragraph IN18 says they
are “probability-weighted”

Time Value of Money (Paragraph 63)
 Use “current market discount rates that

adjust the estimated future cash flows forthe time value of money.”

Time Value of Money (Paragraph 63)
 Don’t use existing portfolio of assets
 Paragraph 69: “the discount rate should

be consistent with observable current
market prices for cash flows wherecharacteristics match those of theinsurance liability, in terms of timing,
currency and liquidity.”

Risk Margins (Paragraph 71)“an explicit and unbiased estimate of
the margin that market participantsrequire for bearing risk (a risk margin)
and for providing other services, if any(a service margin).” Explicit Unbiased

Risk Margins Purpose
 Risk margins provide for:“An explicit and unbiased measurement of
the compensation that entities demand forbearing risk.” Not for conservatism

Risk Margins
 Estimating risk margins
 Typically, cannot be observed Assess how market participants

would measureRisk Margins
 Suggested Suitable Methods(Appendix F)
 Confidence levels
 Conditional Tail Expectation (CTE) Explicit margin within a specified range
 Cost of capital and others

Risk Margins
 Estimate Risk Margins using appropriate

combination of:Observed market prices for similar contracts} Pricing models} Other inputs if available:}

 Prices for similar new contracts
 Reinsurance prices
 Prices for insurance – linked securities
 Prices for business combinations or
portfolio transfers

Risk Margins
 Approach to estimate risk margins

Should be explicit, not implicit} Should reflect all risks associated withthe liability} Should not reflect risks that do not arise
from the liability, such as investment risk
} Should be as consistent as possible withobservable market price}Risk Margins
 Cost of capital approach}

Determine the amount of capital backing
the liabilities
 Regulatory capital Economic capital}

Determine the cost of holding that capital Cost of capital as required by the market
 Cost of capital = % CoC × capital required}

Margins = PV of Cost of capitalRisk Margins Calibration
 The insurer needs to estimate the pricethat market participants require both atinception and subsequently.
 “The margin should be as consistent as

possible with observable market prices.”

Risk Margins –Implementations B and A
 Implementation B – exit value}

But please comment on

 Implementation A – entry value}

No gain at issue

Service Margins
 Per IASB staff, “service margins” would

normally be included in cash flows andrisk margins
 It was given its own paragraphs to ensure
it wasn’t overlooked
Service
Margins

Non-guaranteed Elements
 Participating policies
 Universal life Deferred annuities

Constructive Obligation
 A present obligation that arises from anentity’s past actions when:(a) By an established pattern of past practice,
published policies or a sufficiently specificcurrent statement, the entity has indicated to otherparties that it will accept particularresponsibilities; and(b) As a result, the entity has created a valid
expectation in those parties that they canreasonably rely on it to discharge those
responsibilities.
from Appendix/Glossary

Policyholder Participation
 Paragraph 254: “…the cash flows usedin measuring a participating insurance
liability should incorporate for eachscenario an unbiased estimate of thepolicyholder dividends payable inthat scenario to satisfy a legal orconstructive obligation that exists at thereporting date.”

Universal Life
 Paragraph 267: “…estimates of crediting

rates in each scenario should reflect theestimated rate payable in that scenario tosatisfy a legal or constructive obligationthat exists at the reporting date.”

Concerns
 The Board was very split on whether

or not these items should be considereda liability.

Universal Life
 Paragraph 154: “…future premiums

should be included…if and only if…
(a) the policyholder must pay thepremiums to retain guaranteed
insurability.” Conflicts with concept of exit value, what
an acquirer would pay

3. Things I Like

Things I Like
 1 – a single standard of investor

accounting for insurers around the world
to prepareThings I Like
 2 – No contract classification;same guidance for life, health andmost annuities This means,Things I Like
Contract
Sold by
Insurance
CompanyLong Duration

No
More
Flow
Chart

Yes

Significant
Mortality/Morbidity
Risks Present?
(1)

Yes

Annuity Contract?

Par: Expect
to Pay Divs.
Based on Actual
Experience?

No

Dividend Based
Upon Contribution
Method?

Yes

Yes

No

Probability of Life
Contingent Payments
Remote?

Yes

Yes

No

No

No

PV of Life
Contingent Payments
Insignificant Relative to
PV of Total Pay?

Yes
No

Yes

No

Annuity with Life
Contingent Payments?

No

Premium Varied by
Policyholder without
Consent of the Insurer?
Are you a mutualcompany?
(2)

NoParticipating or
Nonguaranteed Premium
Contract?

Significant Revenue
from Other Than
Investment Return?

Any Contract Element
Changes Expected Based on
Changes on Changes inInterest or Markets?

No

A

Yes

Any Mortality,
Admin., Initiation,
Surrender, Interest or Other
Amount Not Fixed?

No

No

Yes

Yes

No

Yes

No

Stated Account Balance?

Yes

Yes
Any Premium Paid
Over Period
Shorter than Benefit Period
ExcludingSettlement Period

SFAS 97
Investment Contract

SFAS 91
Investment Contract

SFAS 60
Short Duration Policy

No

A
Yes

SFAS 97
Limited Payment Contract

SFAS 60
Long Duration Policy

SFAS 120& SOP 95-1

SFAS 97Universal
Life-Type Contract

Yes

Things I Like
 3 – Always current estimates

Things I Like
 4 – Explicit loss recognition andrecoverability studies not neededThings I Like
 5 – No SOP’s, No FAS133, No DAC

SOP 03-1

FAS 133

SOP 05-1

DAC

Things I Like
 6 – Closer economic match of assets

and liabilities

Things I Like
 7 – we need more actuaries

Brother} Sister} Son} Daughter}

4. Things I
Don’t Like

Things I Don’t Like
 1 – “Exit Value” not what party would pay forexisting block
Future Universal Life premiums} Single discount rate used for all scenarios} Entity-specific values may not beuseable, for example, expenses} Risk margins} Agency force} Taxes} Acquisition cost recoveries} Profits}Things I Don’t Like
 2 – Very thin market; when to calibrate}

Preliminary Views calls for “consistency
with observed prices to the extent they areavailable.” [paragraph IN20g]
Always calibrate?
} Never calibrate?
}

Things I Don’t Like
 2 – How to know what to calibrate to,

Example one:}

Multi-line parent sees attractive prices anddecides to divest life operations in 2000.

Attribute: Bob Shapiro

Things I Don’t Like
 2 – Sample prices
YEAR

BUYER

BOUGHT

P/E

P/B

1998

FortisJohn Alden

27

1.6

1998

Swiss ReLife Re

38

2.6

1998

AIG

Sun America

36

5.4

1999

Allstate

Am. Heritage

24

3.3

1999

Aegon

Transamerica

14

1.7

2000

ING

Reliastar19

2.4

Things I Don’t Like
 2 – But prices fall
YEAR

BUYER

2001

Old Mutual

2001

BOUGHT

P/E

P/B

FVG

11

1.1

Nationwide

Prov. Mutual

15

1.5

2001

Sun Life

Clarica

20

2.4

2002

Manulife

Canada

17

1.7

2003

Prudential

Cigna

11

1.9

2003

Manulife

John Hancock

12

1.3

Things I Don’t Like
 2 – Over 40 potential buyers

view company
Many bids are submitted, but none highenough for management} So, management decided not to sell
the block} If you were the valuation actuary, how would
you be calibrating?

Things I Don’t Like
 3 – Calibration Example 2

Scottish Re acquires ING individual
reinsurance operations at 12/31/2004} Assets = reserves = $800 million} ING pays to Scottish Re ceding commissionof $560 million} Other bidders needed $1 billion} Now you have an observable price;calibrate?
}

Things I Don’t Like
 3 – Calibration Example 2

Two years later} Significant reserve strengthening} Scottish Re stock plummets 75% insingle day} Comments on other bids
} Another observable value} Calibrate?
}

Things I Don’t Like
 3 – Calibration}

Value of transactions
 Overpaid
 About right Underpaid

Things I Don’t Like
 4 – Earnings at issue$¥

Things I Don’t Like
 5 – Daunting to calculate and checkThings I Don’t Like
 6 – More susceptible tounwarranted pressures

Things I Don’t Like
 7 – Income statement may be unsuitable

for a measure of performance

Things I Don’t Like
 8 – Difficult to predict5. Impacts on Insurers
Solvency
US GAAP
Embedded value
Perspective of the presentation

Solvency
 International Association of

Insurance Supervisors (IAIS)
This body of regulators would like to adopt
IFRS as statutory} So all countries around the world would be
regulated using same set of books andsimilar rules for total capital}US GAAP US, SEC, FASB, Wall Street realize theyneed to be competitive SEC has said they will accept IFRS
statements without reconciliation to
US GAAP FASB – will consider replacing
US GAAP with IFRSEmbedded Value Needed to analyze results
 Likely will provide more insights

than IFRS May be more suitable forincentive compensation

Perspective
 Statutory – what the regulators think US GAAP – primarily what you think IFRS – what you think someone

else thinks

6. Society of Actuaries
Numerical Examples

SOA Numerical Examples
 Society of Actuaries Study

Completed February, 2008
} Commissioned by American Academyof Actuaries} 15 companies} 20 Submissions} 80 pages} Available on SoA website}

 www.soa.org/research/research-life.aspx

Products Covered Traditional life (Term) Universal life (UL) Variable universal life (VUL) Single premium fixed deferred annuity(SPDA)
 Variable deferred annuity
 Single Premium Immediate Annuity (SPIA) Long-term care Supplemental health (medical)

Deliverables
 Existing business and new business US GAAP – balance sheet andincome statement
 IFRS – balance sheet andincome statement
 Alternate scenarios
 Observations

Take a Look Let’s look at six products

New business income statements} IFRS basis is “Implementation B”} Liability basis is sum of} PV of cash flows and PV of margins, Both discounted at risk-free rate}

Margins use Cost of Capital method

Risk Margins – Liability
 The liability for risk margins= Present Value of
Cost of Capital rate
× capital in year t
where
Present Value uses discount rate fromthe scenario,
Cost of Capital rate is 12%, andCapital in year t comes from capital factors
on next slide

Risk Margins – Capital Factors

SampleCapital Factors

AV/Claim

Face

Premium

Fixed Annuity

1.15%

3.08%

Immediate Annuity

1.15%

3.08%

Participating WL

1.15%

Supplemental Health

5.00%

Term Life

0.9%

3.08%
4.27%

0.9%

3.08%

Risk Margins – Calibration
 Base line – used 100% United States

Risk Based Capital, an estimate of
economic capital For perspective:
300–750% – most companies} 300% – an A company} 100% – company action}

Term – GAAP and IFRS – Income

25,000,000
20,000,000
15,000,000
GAAP10,000,000

IFRS

5,000,000(5,000,000)

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20First year premium = $28,000,000Term – Comment on First Year Earnings
 GAAP – first year non-deferrable costs of$5.5 million cause a loss
 IFRS – day one gains are $19 million;
days 2–365 gains are $4 million

Term – IFRS “B” and “A” – Income

25,000,000
20,000,000
15,000,000

IFRS Base

10,000,000

IFRS Imp A

5,000,000
1

2 3

4

5

6 7

8 9 10 11 12 13 14 15 16 17 18 19 20

Term – Risk Margin Sensitivity – Income

25,000,000
20,000,000
15,000,000

100% RBC 12%
300% RBC 12%

10,000,000

100% RBC 18%

5,000,000(5,000,000)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

SPIA – GAAP and IFRS – Income

2,000,000
1,000,000(1,000,000)

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20

GAAP
IFRS

(2,000,000)(3,000,000)(4,000,000)(5,000,000)

Premium = $117 million

Health GAAP and IFRS – Income

16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000(2,000,000)

GAAP
IFRS

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20First year premium = $3.2 million

Health IFRS “B” and “A” – Income

16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000(2,000,000)

IFRS BaseIFRS Imp A

1 2

3 4 5 6 7

8 9 10 11 12 13 14 15 16 17 18 19 20

Par Whole Life GAAP & IFRS – Income

40,00020,000(20,000)

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20
GAAP(40,000)

IFRS(60,000)(80,000)(100,000)(120,000)First year premium = $133,000

Par Whole Life – Exclude Dividend – Income

150,000
100,000
50,000GAAP
IFRS(50,000)(100,000)(150,000)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

IFRS Var 3

Variable UL GAAP and IFRS – Income

1,800,000
1,300,000

GAAP
IFRS

800,000
300,000
19

17

15

13

11

9

7

5

3

1

(200,000)First year premium = $3.2 million

SPDA GAAP and IFRS – Income

5,000,000
4,000,000
3,000,000
2,000,000
GAAP

1,000,000(1,000,000)

IFRS
1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20(2,000,000)(3,000,000)(4,000,000)

Premium = $3.2 million

Relative Size (1 of 2) of
Cash Flows and Risk Margins ($000)
Year 1

Year 5

PAR WLPV Cash FlowsPV Margins<$497>
232<262>$2,916
215
3,131

UL

PV Cash FlowsPV Margins

68
53
121

1,326
42
1,369

SPIA

PV Cash FlowsPV Margins

919
9
928

722
6
727

TERM

PV Cash FlowsPV Margins<1,766>461<1,305>

<875>
344
<531>

PV = Present ValueRelative Size (2 of 2) of
Cash Flows and Risk Margins ($000)
1

5

VUL

PV Cash FlowsPV Margins<$2,330>
142<2,187><$1,573>129<1,444>SPDA

PV Cash FlowsPV Margins

940
2
942

892
1
893

HEALTHPV Cash FlowsPV Margins<4,526>87<4,439><1,507>65<1,442>LTC

PV Cash FlowsPV Margins

<21>
366
346

3,137
270
3,407

PV = Present Value

Balance Sheet, Term

20,000,000
10,000,000(10,000,000)(20,000,000)(30,000,000)(40,000,000)

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19

GAAP
IFRS

Balance Sheet, Health

20,000,000
15,000,000
10,000,000
5,000,000

GAAP(5,000,000)(10,000,000)(15,000,000)(20,000,000)

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19

IFRS

Summary 1 of 2
 Income varies dramatically by product Products that derive a significant

portion of their profits from investment
income will show lower profits, or losses,
in year one.

Summary 2 of 2
 Products with significant sources of

profits other than investment income
portray a larger year one income
 Initial and subsequent profitability isextremely impacted by choice of
methods and assumptions to determine
risk margins

7. Responses
to the IASB

Responses to IASB (as of January 2008)
 Go to www.IASB.org}

Click on (left-hand column):
 IASB projects and work plan, then Insurance contracts, then
 Discussion paper, then
 Comment letters}

151 responses, 2,000 pages

Profiles of Responders
 47 insurers (2) 28 professional societies (4) 23 regulators (2) 6 auditors (4) 32 industry associations (3) 15 others (2)AIG – U.S.-based; in 130 countries
 Generally supportive Leave general (property & casualty) insurance

alone (have 2 models) Questions relevance of exit value
Hypothetical} Not observable} Pricing details unavailable} No profit charge} Market data inferior to entity-specific} Unwarranted profit at inception

ManuLife –Canadian-based; in 19 Countries
 Very supportive; is similar to

Canadian GAAP Some refining is needed – use discountrates an insurer would expect to earn Needs more specific guidance, especiallyin margins

International Actuarial Association(IAA) – 57 Members; 95% of Actuaries
 Constraints on cash flows should

be removed
 Use own (not market) servicing(expense) costs
 Eliminate service margins
 Don’t unbundle
 Reflect diversification effects in margins
 Don’t overlook the income statement

United Kingdom Actuarial Profession(Institute, Faculty, 17,000 Members)
 Comments only where they differ from IAA
 Some views too complex and demanding for

all preparers
 Measurement – value should reflect own costs
to settle, not to transfer to a buyer
 Cash flow assumptions – should be from theviewpoint of the insurer, not the market
 Risk margins – should be based on insurer’s
cost for risk where there is no market

American Academy of Actuaries (AAA)(USA – 15,000 Members)
 Has concerns

Gains at issue} Too much actuarial guidance (should do
by nation)} Impractical issues (each possible scenario)} Limitations on cash flows}

Institute of Actuaries of Japan
(3,500 Members)
 Should reflect policyholder dividends inthe liabilities
 Discount rate – need rates for very long term
 Difficult to calibrate insurance products
to market
 Expenses – use entity-specific Need consistent measurement
and reporting of changes in assets
and liabilities

Institute of Actuaries of Korea(800 Members)
 Agrees with using a transfer to anotherparty as the source for calibration
 Should define Fair Value first Should provide some practical examples

International Association of
Insurance Supervisors (IAIS) [1 of 2]
 Its members supervise 140 countries,

97% of world’s insurance Would like to use IFRS accounting forsolvency (statutory) purposesInternational Association of
Insurance Supervisors (IAIS) [2 of 2]
 Endorses principles-based Supports some form of exit value Suggests a “reference entity”(large, efficient, well-diversified) withequal or higher rating Reflect all expected cash flows

International Organization of
Securities Commissioners (IOSCO) Its member organizations regulate 90% of

the world’s securities markets
 Generally supportive, but
Difficult to determine market
participant assumptions} Solvency – increasing a discount rate (owncredit standing) lowers a liability} Include all cash flows relevant tothe contract}

Ernst & Young(Worldwide Audit Firm) Why not these principles for

all industries?
 Not supportive of Exit Value
Hypothetical} Doesn’t reflect actual cash flows}

 Can’t assess quality of earnings

Source of earnings} Identify impacts of judgment}

 Focus on entity’s own value and entity’s

principal market – the customer

PricewaterhouseCoopers 1 of 2
(Worldwide Audit Firm)
 Affirm consistency with other IASB initiatives
 Consult more widely with affectedparties and field test Reliability of data is dependent on anassessment of a transaction in ahypothetical market
 Hypothetical basis – does not meet the needsof users for transparency
 Is exit value relevant?

PricewaterhouseCoopers 2 of 2
(Worldwide Audit Firm)
 Changes to building blocks}

Cash flows
 Include all cash flows
 Consider market value only when
directly observable

Discount rates – drop liquidity adjustment} Margins – needs more work}

 How to select? Not observable Portfolio vs. entity
 Why service margin?

KPMG(Worldwide Audit Firm)
 Generally supportive Less emphasis on market participants’views and more on internal information
 Risk margins – little or no consensus, so
use entity-specific “Exit Value” as defined wouldn’t
produce a transaction price – so don’t callit exit value

Deloitte(Worldwide Audit Firm)
 Market data must be available andrelevant; use entity-specific Margins need further elaboration andshould address explicit profits
 Use all relevant cash flows
 Gains/losses at issue is acceptableMerrill Lynch(Buys/Sells Securities)
 Too theoretical Reduces comparability within

the industry
 All you need to do is align liability
discounting with rates used for assets to
help identify asset/liability mismatch

Standard & Poor’s(Rating Agency) Wants more disclosures
 Use all cash flows
 Gains at issue are acceptableGNAIE – 16 gigantic Life and P&C Insurers

Group of North American Insurance Enterprises

 Doesn’t support Exit Value “Market consistent” is a problem because there

are no regularly observable transfer markets
 Wants extensive field testing Recognize profit over coverage period Develop separate models for life and P&C
 No restrictions on building block cash flows
 Discount rate – reflect actual return

CFO Forum (1 of 2)
 Represents Europe’s 20 largest insurers,

94% of the market
 Discussion Paper is good starting point As is, it is not relevant to users, preparers
or regulators
 Keep working; maintain dialogue anddue process Field test before a final exposure draft is issued
 Tie in with regulatory developments,
such as solvency II

CFO Forum (2 of 2)
 Issues with three building blocks

Level of day one profit} Use discretionary benefit payments} Consider all expected cash flows} Use run-off, not transfer or exit values} Hold back initial profits at issue andrecognize in line with release from risk overthe lifetime of the contract}

Umbrella – CFO Forum, GNAIE andFour Large Japanese Insurers
 Areas of consensus:

Recognize all futurepremium} Recognize all future
expected payments topar-policy holders} Don’t use market
assumptions for
expenses} Unit of account –redefine portfolio solely
on the “managed
together” criteria}

Do not unbundle} Do not reflect “owncredit standing” invaluing liabilities} Going forward, engage
in robust and transparent
process for engaging
with preparers and users
prior to issue of both theexposure draft and final
standard}

8. Responses to FASB
Invitation to Comment

Profiles of Responders
 13 insurers 6 professional societies
 2 regulators
 4 auditors
 8 industry associations
 11 others

Respondents
 44 in total; 500 pages
 29 clearly answered questions 1 and 2

FASB Question 1
 Is there a need for a comprehensive

project to redo U.S. GAAP for insurance?
Yes – 25
} No – 4}

FASB Question 2
 Is the Discussion Paper a suitable

starting point?
}

All 25 who said yes to question 1:
 Yes – 10; No – 15}

Americans only
 Yes – 4; No – 13

9. Next StepsIASB Next Steps From summer 2007:

Exposure draft, November 2008
} Final standard, November 2009
} Effective Date, around 2011
} Now moved back
} Coordination with other projects could slow down
the timeline}

 Conceptual framework
 Other IFRS standards on revenue recognition and fairvalue measurement
 Coordination with FASBFASB Next Steps
 Will likely participate directly with IASB Maybe spring 2008 decision on how to

go forward

SEC Next Steps (1 of 3)
 Recent steps

Allowed foreigners to file IFRS financials
without reconciliation} Asked if U.S. registrants should be able todo the same
} Issued statement saying it’s aware there are
no IFRS standards for insurance}

SEC Next Steps (2 of 3)
 Concerns to be addressed}

Ceding control of U.S. standard
 U.S. is ⅓ of world’s GDP
 ⅓ of market capitalization

Will IASB be able to keep up with theworld’s emerging issues?
} What if national interpretations or
recommendations develop?
}

SEC Next Steps (3 of 3)
What if judgment is boundless?
(no comparability)} What if enforcement is too diverse?
} IASB must be properly funded} Concern over IFRS “as adopted” bydifferent countries}

Questions & Answers
therget@polysystems.com