LAPFF responds to UK Endorsement Board on IFRS 17 – Insurance accounting

February 4th 2022

Governance Risk

Reliable accounts


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LAPFF has submitted a response to the newly formed UK Accounting Standards Endorsement Board concerning its draft endorsement advice on IFRS 17 (Insurance).

LAPFF’s response highlights a lack of due process in assessing the standard.

Bad accounts and bad audits are likely to mean that investments are worth less or are even worthless. Having the correct endorsement criteria for accounting standards is a significant matter of public interest.

The UKEB has shown no process to assess its endorsement criteria which is “a true and fair view of the assets, liabilities, financial position and profit or loss”:-

it has avoided dealing with case law.

it has avoided assessing against the central accounting principle of prudence.

it has changed “a true and fair view of the assets, liabilities, financial position and profit or loss” to “a true and fair view of the accounts as a whole” which shifts matters to “disclosure” rather  than the numbers being correct.

it has tried to equate “true and fair view” test (which has a statutory setting and is the standard for accounts to comply with Company Law) with something different “economic substance”.

it has tried to side step the purpose of its approving standards; which is so that companies applying those standards will in general meet the true and fair view to test. Instead it has made one up, being that there is nothing in the standard preventing accounts giving a true and fair view. That is not the same. By the logic of the UKEB it could endorse a blank sheet of paper or even a telephone directory. Indeed the UKEB would not even need to exist.

Some previous issues with the UKEB are covered here.

The UK Shareholders Association (‘UKSA’)  had a  member on the Technical Advisory Group ‘TAG’ of the UKEB. Its response to the IFRS 17 consultation says:-

“the TAG process is not designed to produce an independent and objective outcome. It is stage managed and scripted, consisting of papers either written by the Secretariat, or heavily edited by them. At meetings, members are simply asked if they agree or disagree, with no detailed discussion or analysis possible.

 “the TAG is dominated by preparers and their auditors, who have no interest in challenging insurance firms’ practice on discount rates, having tacitly endorsed the practice either in preparing the accounts, or signing off on them.”

This debate in Parliament at which the UKEB was given its powers demonstrated considerable unease with the governance of the UKEB.

The Financial Reporting Council (‘FRC’) has the responsibility for oversight of the UKEB’s governance and due process. We are therefore writing to the FRC, to ensure that the UKEB has due process.

Grandfathering pre-Kingman Review FRC positions will be unsatisfactory as the FRC has had significant problems and has quite obviously been a subject of regulatory capture, i.e. by adopting positions favourable to the parties it regulated. That included serving Big 4 public affairs partners (‘lobbyists’) sitting on some of the constituent FRC Committees for which technical material is extant.

An ICAEW paper referenced in the LAPFF publication “Sorry, Wrong Number” stated:-

“A feisty attitude to the law became a long-running tradition for the leaders of the accountancy profession. However, in the field of financial reporting, it was necessary to become rather more subtle once the detailed accounting rules from the EU had entered British law in the Companies Act 1981. The UK standard-setters then used many devices to outsmart the law.”

The UKEB appears to be following in those footsteps.


See also Fraud and Going Concern