Feb 03, 2014
From the IFRS Institute
The January 2014, Issue 36 of KPMG ISG's IFRS Newsletter: Insurance - Moving Towards Global Insurance Accounting highlights the IASB and FASB's discussions in January 2014 about the joint insurance contracts project and summaries of feedback developed by the staff.
Generally, respondents welcomed the 2013 insurance proposals. However, many felt that the benefits would outweigh the costs only if the Boards can resolve critical issues around complexity, accounting mismatches, and participating contracts. Areas of frequent comment included:
- Wide support for unlocking the contractual service margin, including for changes in the risk adjustment related to future periods (IASB only);
- Requests that the FASB permit similar adjustments to the single margin alongside clarification of the release of margin;
- Criticism that the participating contracts proposals are too complex and difficult to apply consistently;
- Mixed feedback about the proposals for presentation, with respondents to the FASB more dissatisfied than respondents to the IASB;
- Overall support for the use of other comprehensive income to present the effects of changes in discount rates – but respondents felt that it should be optional, rather than mandatory; and
- Clarification of the FASB’s definition of a portfolio, and modifications to the scope of its proposals.
Many FASB respondents supported convergence; however, some would prefer targeted improvements to U.S. GAAP if convergence cannot be achieved. Additionally, many would not support changing existing U.S. GAAP for short-duration contracts.