The International Accounting Standards Board has issued a revised exposure draft containing proposals for changing the accounting for insurance contracts.

The exposure draft unveiled Thursday by the IASB builds upon proposals published in 2010, and reflects feedback received during the extensive public consultation period that followed the publication of those proposals.

The insurance contracts standards were one of the priority convergence projects that the IASB had been working on with the Financial Accounting Standards Board in the U.S., but in the past year it has taken a back seat to a push to complete the revenue recognition, leasing and financial instruments projects in the joint deliberations by the two boards.

While the insurance accounting standards in U.S. GAAP already provide many rules for U.S. insurers, they are seen as comparatively underdeveloped in International Financial Reporting Standards, so the IASB has been separately pursuing development of them with the goal of eventually converging them with U.S GAAP.

The revised proposals aim to provide a consistent basis for accounting for insurance contracts and to make it easier for users of financial statements to understand how insurance contracts affect an entity’s financial position, financial performance and cash flows. While the model presented in the 2010 exposure draft was broadly supported, some specific issues were raised that the IASB has sought to address. The revised proposals respond to those issues by introducing enhancements to the presentation and measurement of insurance contracts while seeking to minimise artificial accounting volatility.

When the IASB began its work in 2001, there was no standard on insurance contracts in the International Accounting Standards, from which IFRS evolved. In preparation for the adoption of IFRS by the European Union and others in 2005, the IASB introduced an interim standard (IFRS 4) until a more comprehensive review of the accounting for insurance contracts could be completed.

The first phase of that comprehensive review began in 2007 with the publication of a discussion paper followed by an exposure draft that was published for public comment in 2010.

The revised exposure draft sets out in full the proposals for the accounting for insurance contracts. However, respondents are asked for comments on the key areas that the IASB has changed as a result of the responses it received to the 2010 exposure draft.

“We are approaching the end of this important project to bring consistency and transparency to the accounting for Insurance contracts,” said IASB chairman Hans Hoogervorst in a statement. “The document published today responds to concerns expressed about non-economic volatility resulting from our previous proposals. We are now seeking further feedback before finalizing this much-needed standard.”

The revised exposure draft is available for comment until Oct. 25, 2013. In addition to input received from comment letters, the IASB plans further outreach activities and field testing of the revised proposals. A high level “snapshot” summary of the proposals is available here.

Further information, including the IASB's exposure draft, is available on the IASB's Web site's "Open to comment" page. On June 25, 2013 the IASB will hold two live webcast at 10 am and 3 pm London time (5:00 am and 10:00 am Eastern time). More information, including details on how to register, can be found here.

The IASB and FASB are publishing separate exposure drafts on their proposals related to insurance contracts, the IASB noted. The two exposure drafts have overlapping comment periods, enabling interested parties to compare and comment on both proposals. The two boards have worked jointly to develop proposals to improve and simplify financial reporting requirements and to provide investors with useful information about insurance contracts, the IASB noted. As a result, most of the conclusions reached by the IASB and FASB are consistent, although important differences remain in how the IASB and FASB each propose to portray the pattern of profit recognition, and in how the entity reflects changes in the estimates of the profit that is earned from insurance contracts.

While the IASB and the FASB wish to achieve convergence in their proposals, each board is subject to different time pressures and are at different stages in the progress of their projects, the IASB acknowledged. The IASB has no comprehensive standard for the accounting for insurance contracts, and is seeking targeted input on the particular areas for which it proposes changes to its previous proposals in the 2010 exposure draft. In contrast, according to the IASB, FASB is seeking input on the entire package of its proposed improvements to longstanding U.S. GAAP because FASB has not previously published an exposure draft with proposals on this subject.