BC2 The Board's predecessor organisation, the International Accounting Standards Committee, began a project on insurance contracts in 1997. The Board was created in 2001 and included an insurance project in its initial work plan. Because it was not feasible to complete the project in time for the many entities that would adopt IFRS Standards in 2005, the Board split the project into two phases.

BC3 The Board completed Phase I in 2004 by issuing IFRS 4, which:

(a) made limited improvements to then existing accounting practices for insurance contracts; and

(b) required an entity to disclose information about insurance contracts.

BC4 However, the Board had always intended to replace IFRS 4 because it permits a wide range of practices. In particular, IFRS 4 included a 'temporary exemption' that explicitly stated that an entity need not ensure that its accounting policies are relevant to the economic decision-making needs of users of financial statements or that such accounting policies are reliable. As a result, there was wide diversity in the financial reporting of insurance contracts across entities applying IFRS Standards, and within some entities' financial statements. In addition, some of that financial reporting did not provide useful information about those contracts to users of financial statements.