A recent analysis from Standard & Poor’s concludes that “changes in interest rates could cause potentially significant swings in earnings and capital.”
The ratings firm said that although its credit analysis focuses on the financial condition of a company regardless of accounting, changes like a new format for the balance sheet, income statement or disclosures “may bring to light information that we would need to consider in our analysis,” S&P said.
- The proposals would allow better comparisons of insurers in different countries.
- Long-term historical comparisons would be difficult, since the new standards are radically different.
S&P is the first I’ve seen to acknowledge the QWERTY problem: Current standards are flawed but sophisticated users know how to adjust for them. And a change creates a steep learning curve.
Like most, though, S&P seems to believe the new standards are worth the effort.