Convergence of accounting standard is the notion of forming a single accounting standard globally. Accounting standards delivered by various regulatory bodies are harmonized through convergence. Accounting standard- setters work to converge standards to avoid the reoccurrence of cases like that of Enron (Godfrey and Chalmers, 2013) . The current event illustrating the convergence of accounting standards is the call by Hans Hoogervorst , the Chairman of International Accounting Standards Board (IASB), to have the accounting for insurance to echo the reality of the economy. It took place in Berlin to debate on the completion of the insurance contracts Standard. Many events in Germany led to the need for the global accounting standards. ("IFRS - IASB Chairman: Insurance Accounting Must Reflect Economic Reality"). Hence, steered the use of the US GAAP during reporting. This improved transparency, accountability, and efficiency.
Hoogervorst said that from their research, almost one hundred and twenty countries are in need of the IFRS Standards, and twelve of them have authorized its use. Mexico and Canada have fully adopted the standards. Additionally, the key economies of Africa are full adopters. Korea, Hong Kong, Singapore, and Malaysia have embraced it, while Indonesia and China have confirmed their assurance to achieve full convergence with IFRS. The IASB is working hard to convey substantial developments to the Standards’ quality. Projects on recognition of revenue, accounting for leases, and financial instruments have been completed. The insurance contracts are complex, and the staff of IASB is testing the workability of the wordings through the industrial inputs. The present insurance Standard is old. Hence, insurance companies are less comparable. An effects analysis of the innovated insurance contracts Standard will bring out the required standardization ("IFRS - IASB Chairman: Insurance Accounting Must Reflect Economic Reality"). Some accounting practices in the current insurance industry are not on par with the generally accepted accounting practices for the other sectors of the economy. An example is the deposit requirement by most insurance premiums because, various insurance products combine investment with insurance protection.
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Additionally, there are many methods of measuring the insurance liability. Some use the discount rates based on the assets’ expected return; the risk-free discount rates are also employed, while others make use of the historical rates founded on interest rates at the commencement date. Consequently, there lacks comparability within insurance companies, and amongst insurance companies, and other portions of the financial business, like banks. The insurance industry is very helpful in creating the new Standards. Therefore, they want the issue to be fixed immediately calling for the publication of the standard as soon as possible (Godfrey and Chalmers, 2013). This will ensure the aim of convergence of upholding efficiency is attained.
References
Godfrey, Jayne M and Keryn Chalmers. Globalisation of Accounting Standards . Cheltenham, UK: Edward Elgar, 2013. Print.
"IFRS - IASB Chairman: Insurance Accounting Must Reflect Economic Reality." Ifrs.org . N.p., 2016. Web. 24 Sept. 2016.
