The International Accounting Standards Board has decided to re-expose the latest version of its ongoing project aimed at revising the accounting standards for insurance contracts and is seeking feedback.
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The insurance standards are among the four priority projects that the IASB and the U.S. Financial Accounting Standards Board have targeted for convergence, along with revenue recognition, financial instruments and leasing. The two boards reportedly remain far apart on coming to an agreement on the standards, although there has been some progress.
The IASB met separately on Wednesday to continue its discussions on proposals for insurance contracts accounting. While the deliberations on the project are not complete, in the interest of providing greater certainty to the market and given the late stage of the deliberations, the board considered the need to re-expose its proposals and decided that the proposals should be re-exposed to stakeholders, with feedback being sought on only a limited range of questions.
In coming to the decision to re-expose, the IASB said Friday that it considered a number of factors including the length of time that has already been devoted to the project and the importance of issuing a final standard in a timely fashion. However, the board decided, on balance, given the substantive nature of the changes made since the original exposure draft was issued, and the importance of understanding the operationality of its proposals, that re-exposure is warranted.
“We are very aware of the difficulties faced by insurance companies and pension funds in the current low interest environment,” said IASB chairman Hans Hoogervorst in a statement. “As such we realize the importance of establishing a workable standard based on current measurement as soon as possible. However, it is of equal importance that we get this standard right. In light of some changes made since the original exposure draft and the benefit that we believe can be gained from obtaining constituents’ input on these targeted areas, I believe that targeted re-exposure is the right decision. Limiting the questions in this way will enable us to avoid re-opening issues which have already been decided and sufficiently re-deliberated.”
The targeted questions in the new exposure draft will relate to proposed requirements for treatment of participating contracts; presentation of premiums in the statement of comprehensive income; treatment of the unearned profit in an insurance contract; presenting, in other comprehensive income, the effect of changes in the discount rate used to measure the insurance contract liability; and the approach to transition.