| China’s insurance market has started to spring up since 1980. Major players in market are gradually diversified, and density and depth of insurance are sustainably growing which play important roles in financial compensation, as well as in the economical development of China. However, development of the system which restricts the diversified major players on insurance lags behind that of the insurance industry. Therefore, China’s insurance industry needs a management standard-insurance accounting standard which could safeguard the insurance market, manifest clearly the business performance, financial condition, and competitiveness of insurance company. International Accounting Standards Board (IASB) published the first stage research achievement of insurance accounting standards-International Financial Reporting Standards No.4. In February 2006, our new Accounting Standards for Enterprises promulgated and was officially implemented on January 1st,2007, in which Article 25 and Article 26 are the guidance rules of insurance market in China based on deep research on International Financial Reporting Standards No.4-Insurance Contract and reference on U.S. Financial Accounting Standards No.113, as well as comments of accounting statement users. This Accounting Standards specially combined the demand of insurance companies on overseas list. The new Accounting Standards made requirements on how to define an insurance contract, revenue and reserve fund, which abandoned the old Financial Accounting System and the Insurance Regulations. Especially, on December 22,2009, the Chinese Finance Ministry issued a notice about carrying out Regulations on Accounting for Insurance Contracts. China Insurance Regulatory Commission also issued a notice about the Implementation of Accounting guidelines Explanation No.2 of Insurance Industry to make more specific instruction. China’s insurance companies have started readjust polices of annual reports from 2009. Annual Report has been adjusted accordingly to insurance mix contract split, significant insurance risk test and measurement of insurance contracts debts, etc.In August 2010, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) joint hands to accelerate the establishment of system which plays a crucial role in development of international insurance market-Insurance Contract Standards. At the same time, they published separately exposure draft and discussion draft. It is a necessary choice for China to catch up with International Financial Reporting Standards (IFRS) during the process of blending with international economy. Therefore, this article is going to make a brand new comparison to show the impacts of the latest changes of International Financial Reporting Standards on insurance accounting standards and life insurance business in China during international convergence of accounting standards.This article could be divided into five chapters, as followings:Chapter One mainly discusses the development process of the international insurance financial accounting standards and convergence of China’s insurance financial accounting standards towards international insurance financial accounting standards. It illustrates that the research purpose and methods of comprehensive literature and the comparative research of study.Chapter Two mainly illustrates the differences between the second stage exposure draft of IFRS insurance contract and China’s accounting standard for business enterprises. To make comparisons mainly from these aspects as followings:the scope, split, contrast of major insurance risk test and measurement model test articles, reclassification of finance assets, statement of profit sheet, and transition terms. It also detailed compares from the aspects, such as applicable scope, contract split, major insurance risk test, performance cash flow, risk margin, residual margin, the discount rate, policy acquisition cost and maintenance expenses, etc.Chapter Three mainly studies operating management changes caused by the latest variations of International Accounting Standards. As the key part of this article, it firstly illustrates changes of products’ structure, including change of premium scope and changes of product varieties which would have significant impact on company’s future product orientation and designation. Secondly, risk management, under the principle of fair value of asset-liability, will provides the management of insurance companies more accurate information about product risk and profit, thus leading the company strategic decision on how to manage and control the risks to bring about more stable management. Thirdly, the impact on investment management of insurance company under the convergence process of China’s Insurance Accounting Standards and International Financial Accounting Standards are serious. Owing to greater flexibility and autonomy of the reserve fund prediction, it becomes an important issue on how to draw the reserve fund for insurance company to adjust interest, be profitable and stable.Chapter Tour mainly discusses that in order to forecast the changing of operation management of life insurance companies of China in future, we should do researches on the differences between the latest exposure draft of International Financial Accounting Standard and Dominant Insurance Financial Standard of China. Among the differences to have great effect on operating of Life Insurance Company, there is a change of deferral or not to influence insurance gaining profit. Because of the conservative principle of guaranteed insurance companies in China is given, the initial acquisition cost by the policy cannot be deferred, which must be directly counted in the current profits and losses. Among the international financial accounting standards, a part of the initial acquisition costs can be deferred. Therefore, only if they coexist with each other, stability and profits stationary of the insurance company will be greatly increased. There is difference in the method of calculating reserve fund, too. Meanwhile, there is a different way in presentation way of profit chart. There will be a great influence on Chinese life insurance companies if presentation way of profit chart changes to follow the International Financial Accounting Standard.Chapter five is the last part of the article, which mainly discourses my opinion for life insurance companies to strengthen management stability, raise intrinsic value and increase comprehensive competitiveness. To begin with, increasing professional ethics of accounting staff and the skills of actuary, as well as the competences of professional staff are no doubt preconditions for insurance company operating in a stable way. Meanwhile, improving the investment strategies, as well as the intrinsic value is persisting value of insurance value. Responding to the state policies, particularly in process of continuous changing of accounting standard, would make further progress with constant improvement and adjustment, and it is also a major aspect of risk management. In the daily operation of insurance company, continuously upgrading and integrating for the financial software system would make it keep pace with the changing policies and provide more accurate data for data users in all aspects to meet the demands of making report forms. |
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