Insurance accounting newsletter

The Insurance Accounting Newsletter provides a regular update on the development of the new accounting requirements and a summary of Deloitte’s own understanding of the progress being made by the Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB.)

• March 2011: “Unsuccessful efforts” split the Boards
  The Boards held a number of meetings in February and March, with nearly twenty hours of deliberations on the insurance project. Key topics discussed include acquisition costs, discount rates, the scope of the insurance standard and the definition of an insurance contract.
• February 2011: Gearing up for the last mile
  The IASB and FASB (the Boards) have received more than 300 comment letters. They followed the comment period with three roundtable meetings to speak directly to their constituents and engage them openly on the more salient comments that had been raised in the voluminous feedback received.
• August 2010: The start of a new accounting era
  On 30 July, the IASB published an Exposure Draft (ED) that fundamentally revises International Financial Reporting Standard 4, Insurance Contracts. This ED is the latest step in developing an entirely new insurance accounting standard that will complete Phase II of the IASB’s Insurance Contract project. The comment period closes on 30 November and the final standard is due to be released in June 2011.
• July 2010: Last minute convergence
  The lASB and FASB held four meetings in June. They resolved a number of major long standing disagreements, including acquisition costs and participating contracts. The only main difference remaining is on whether the measurement model should use a risk margin approach to reflect the underlying uncertainty.
• June 2010: Almost there...
  The IASB and FASB continued with their regular meetings in May and managed to address most of the remaining issues to be covered by the Exposure Draft, which will likely be published before the July meeting of the IASB.
• May 2010: Steady, if slow progress
  After another long week of joint meetings during the month of April, the IASB and FASB have prepared the ground for a last attempt to resolve the major disagreements. The date of the exposure draft publication has officially been moved to June.
• April 2010: Standard setting crunch time
  Following meetings in March between the IASB and FASB, it now seems likely that an Exposure Draft on insurance accounting will not be published in May as planned. Although several common tentative decisions were reached, a few very significant disagreements emerged, particularly on the subject of risk adjustments and day one calibration.
• March 2010: Insurance accounting taking shape
  The publication date of the Exposure Draft on insurance accounting is fast approaching. As promised, the IASB and FASB have included in their agenda several sessions dedicated to insurance in an effort to meet the May publication deadline. They held two joint meetings in February and at least six are planned for March. This edition reports on the discussions on financial statement presentation, accounting for reinsurance contracts, unbundling and embedded derivatives, and variable or unit-linked type contracts.
• February 2010: The road to convergence
  The IASB and FASB have started the year with a busy schedule of meetings, two joint meetings having already taken place in January. This edition reports on the discussions held in the three hour long meeting of 19 January and the subsequent FASB meeting on 27 January. The long awaited exposure draft is finally taking shape and although a few issues remain unresolved, the road to convergence for insurance accounting is in sight.
• January 2010: Insurance global GAAP in the making
  The FASB and the IASB held joint meetings during December and early January at which they re-confirmed their commitment to convergence. At these meetings, they worked through the differences on the measurement model and agreed on new accounting principles that eliminate most of their fundamental disagreements. The expected publication date of the Exposure Draft has now been pushed back to May 2010 with a comment period until September 2010.
• November 2009: Welcomed convergence of the FASB and the IASB?
  Although a renewed drive towards convergence between the FASB and the IASB resulted from the October joint meeting on the subject of initial measurement, it seems that the Boards could not reach the same tentative decision in November on accounting for participating contracts. The expected publication date of the Exposure Draft has now been pushed back to April 2010.
• October 2009: The new accounting model takes shape
  The IASB reached some important decisions on the new accounting model in September, including the selection of the preferred measurement model, some initial decisions on the measurement of margins and some principles for the selection of a discount rate. The IASB also made the decision to remove policyholder accounting from the upcoming Exposure Draft, but indicated that it would be included in the final Standard.
• August 2009: Filing for divorce?
  The FASB and the IASB held individual and joint meetings in July. Two significant differences of opinion on the measurement basis of the proposed new accounting standard for insurance contracts have emerged.
• July 2009 Special: The Insurance Working Group meeting
  This special issue reports on the key issues discussed during the two-day meeting and highlights our own understanding the IWG members comments.
• July 2009: Current Exit Price off the table
  The IASB reached the important conclusion, at its June meeting, in line with FASB, to abandon the Current Exit Price model. A tentative decision was made to replace one of the Current Fulfillment Value models with an alternative model based on the updated IAS 37.
• June 2009: Divergence on new business revenue
  The FASB and the IASB both held meetings were held in May to decide the content of their new convergent insurance accounting standards. The IASB reached a decision on policyholders' behavior and contract boundaries, in line with industry proposals. The FASB discussed margins for risk and acquisition costs and took a tentative decision on new business revenue, divergent from the one taken by the IASB in April.
• May 2009: Margins for risk, new business revenue and calibration
  The IASB has made another step towards the new IFRS for insurance after it reached a set of tentative decisions on insurance accounting at its meeting in April. Although the American FASB discussed the same issues in May, the session was educational rather than decision-making. FASB will attempt to decide on these topics at its next meeting.
• April 2009: Focus on the estimates of insurance cash flows
  The joint work of the IASB and the FASB continued in March with a relatively limited agenda focused on the draft guidance for the estimation of cash flows from insurance contracts.
• March 2009: Conceiving the first global GAAP
  After the extensive background preparation, consultation and education on insurance accounting that has been undertaken so far, the development of the first insurance global GAAP appears to be within reach. Meetings of both the IASB and FASB scheduled throughout 2009 are positive steps towards this goal.