Convergence on insurance still at risk despite progress
Insurance Accounting Newsletter | June 2012
Several attempts to achieve convergence, have seen only partial progress made over the last three months as the various decisions discussed and analysed in this newsletter do not appear to have made the convergence barometer tilt towards the sunny days of agreement.
Issue 25 of the Insurance Accounting Newsletter highlights recent statements made by the FASB chairman that it may be in the best interest of US users if the insurance contract project for US GAAP is developed without converging with the new IFRS.
This call to accept the possibility of divergent solutions for insurance contracts' accounting seems to arrive after a string of important converged decisions – in particular, a key decision on the Premium Allocation Approach (PAA) eligibility criteria was made and progress was made on other core issues, including:
- Unit of account definition
- Onerous contract test
- Disaggregation of investment component
- Patterns of profit recognition.
In this newsletter we also comment on the Boards' chairmen early April report to the G20 on their progress on their convergence towards a "Global GAAP". In that forum they committed to the Financial Stability Board that they would complete all of the four major projects (insurance contracts, financial instruments, revenue from customers and leases) by the middle of 2013 – a commitment that now seems open to debate.
Read the full newsletter for our view on the key issues emerging from various debates.