Tuesday, April 29, 2008

IASB's Jones: Insurance accounting is broken

Current accounting rules for insurance companies are so different from those in other industries that they may not show investors the true economic realities the firms are facing, a top international accounting rulemaker said on Tuesday.

"Insurance accounting around the world is broken," said Tom Jones, vice chairman of the International Accounting Standards Board, at a Pace University accounting conference in New York.

To support his point, Jones said he believed the price-to-earnings ratios of insurance companies, a financial measure often used by investors to value a firm, would be much higher if insurance company bookkeeping was clearer.

However, he added that accounting rulemakers faced a challenge in revising insurance accounting standards.

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