Insurance Accounting Newsletter
On 30 July 2010, the International Accounting Standards Board (IASB) published its Exposure Draft of the new IFRS for insurance contracts. This is a major milestone in the creation of an improved reporting framework for insurance under International Financial Reporting Standards.
In February 2012 the target publication date of the standard was further delayed, with an estimated publication date in the fourth quarter of this year. Preparation for the new IFRS will require significant investment and the detailed assessment of the new proposals will be a key step in what is expected to be a complex implementation challenge. It is hoped that the benefits of these efforts will bring more consistency and transparency to insurance reporting than there is under the current IFRS regime, which in turn should enhance insurers’ ability to raise capital.
Preparation for the new IFRS will require significant investment and the detailed assessment of the new proposals will be a key step in what is expected to be a complex implementation challenge. It is hoped that the benefits of these efforts will bring more consistency and transparency to insurance reporting than there is under the current IFRS regime, which in turn should enhance insurers’ ability to raise capital. The Insurance Accounting Newsletter provides a regular update on the development of the new accounting requirements and a detailed analysis.
The IASB completes its decisions on how to account for all non-participating insurance contracts.
The redeliberation process following the end of the comment period on the draft IFRS Insurance Contracts in October 2013 is a story of two differently paced decision making activities at the International Accounting Standard Board (IASB or the Board). One activity was carried out at a pace that has been sustained throughout 2014 (see Insurance Accounting Newsletter issue 30) and that focussed on the new accounting model for non-participating insurance contracts. This activity can be considered substantially complete at the time of writing.
The other activity has been causing a delay on the original IASB work plan to complete the redeliberations during 2014, as after several educational sessions (including one in 2015) this has yet to enter the decision making stage. This is the debate on the accounting for contracts with participation features.
IASB redeliberations start apace: decisions on CMS unlocking, OCI solution and revenue presentation achieved in two months.
The International Accounting Standards Board (IASB) has continued its redeliberation to produce the first comprehensive International Reporting Standard (IFRS) on Insurance Contracts based on the comments received in its 2013 Exposure Draft (ED) which, by November 2013, had attracted nearly 200 comments letters.
Tre redeliberation process seems to have started apace in the Board meetings held in March and April, with the IASB having made tentative decisions in three of the five areas for which comments were sought:
- Unlocking of the contractual service margin (CSM);
- Presenting the effect of changes in discount rates in other comprehensive income (OCI solution); and
- Presentation of insurance revenue and expenses other than when the Premium Allocation Approach is permitted and adopted by the insurer.
The start of the joint deliberations process is marked by the FASB decision to set a narrower course for the US insurance accounting project.
The beginning of 2014 was expected to start the final stage of the deliberation process of the IASB and FASB to consider the comments received on their respective proposals published in June 2013 and to produce a new IFRS and a new US GAAP pronouncement (an Accounting Standard Update or ASU). The IASB and FASB met in January to consider their respective Staff summaries of the feedback received from users of financial statements and outreach activities. No decisions were required from the two Boards during the meeting. The discussions highlighted key areas of concerns raised by the respondents in the IASB’s 2013 Exposure Draft (2013 ED) for consideration by the Board during their re-deliberations in 2014.
Our Insurance Accounting Newsletter series summarises the debates as well as tentative decisions taken by the Boards, up to and including February 2014.
This edition focuses on the five key areas of the revised exposure draft ED/2013/7 on Insurance Contracts. It describes where the IASB seeks feedback and outlines the considerable business challenges which lie ahead for the insurance industry in relation to addressing these areas.