Oct 28, 2013
From the Financial Reporting View
KPMG recently commented on the proposed FASB ASU, Insurance Contracts, and the IASB ED of the same name which would require an entity to measure its insurance contracts under one of two measurement models. The FASB and IASB proposals would not achieve complete convergence. KPMG believes that developing a common approach under IFRS and U.S. GAAP would significantly improve transparency and consistency in the financial reporting of insurers, and provide benefits for investors and the insurance industry.
While KPMG broadly agrees with principles in the revised proposals, the firm’s comment letter identified specific areas of concern including:
- Treatment of participating features;
- Conditions for adjusting (unlocking) the contractual service margin (IASB) and single margin (FASB) and including a risk adjustment (FASB);
- Required use of other comprehensive income (OCI) to present changes in insurance liabilities due to changes in discount rates;
- Accounting for unit-linked contracts/segregated fund arrangements;
- Presentation of the statement of profit or loss and OCI;
- The scope of contracts included in the proposals; and
- Aligning the effective dates of the financial instruments and insurance proposals.