Insurance Accounting Newsletter
The Insurance Accounting newsletter provides a monthly 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.)
The last chance to influence the IASB on the new IFRS on insurance contracts – A closer look at the new proposals
This edition focuses on the five key areas of the 2013 ED where the IASB seeks feedback and describes the considerable business challenges which lie ahead for the insurance industry in relation to addressing these areas.
IASB published on 20 June its revised exposure draft ED/2013/7 on Insurance Contracts (the 2013 ED) which will remain open for comments until 25 October. This comment period may mark the final opportunity for the insurance industry to influence the new IFRS on Insurance Contracts expected to be released during the second half of 2014. Although the IASB has re‑exposed the entire text of the draft IFRS, it only seeks targeted comments on five areas, thus most parts of the new IFRS should be treated as nearly final. The five areas are those where the IASB judged there was significant change from the original model presented in the 2010 ED.
On the other hand, the FASB has published on 27 June 2013 an exposure draft of a new US pronouncement for insurance contracts. This document presents the new accounting model for insurance contracts that has been developed jointly with the IASB. However, as commented in several past issues of our Insurance Accounting Newsletter, the proposal is not fully converged with the 2013 ED of the IASB and material differences remain. These are not covered in this issue of Deloitte’s Insurance Accounting Newsletter. Finally, from a due process perspective, the US exposure draft is open for comments on the entire model given that FASB had only published a discussion paper in 2010.
Our Insurance Accounting Newsletter series summarises the debates as well as tentative decisions taken by the Boards, up to and including August 2013.
To find out more about these and other important developments, please download our Insurance Accounting Newsletter issue 28.
- November 2012
This edition is titled 'Greater certainty on the roadmap to the new IFRSs comes with a likely end of IFRS-US GAAP convergence on insurance'.
- August 2012
The ‘OCI solution’ is in and convergence is increasingly out
- June 2012
Convergence on insurance still at risk despite progress made in recent months
- March 2012
Old disagreements and new delays make convergence uncertain
- January 2012
Refining divergent positions and a gleam of hope from IFRS 9 planned revisions
The Boards’ recent action arose from four meetings held in September, October and November, which this newsletter covers, as well as other FASB meetings. Whilst the discussions have been at times particularly intense, the activity itself has resulted in limited progress as unsettled debates resurfaced. Nearly all the tentative decisions from these meetings resulted in further refinements of the divergent positions which helped constituents in their appreciation of the practical implications that each model will have on their businesses. Of particular importance, the IASB unanimously agreed to consider targeted improvements to the classification and measurement requirements of IFRS 9 “Financial Instruments” to address the issues emerging from the accounting mismatches within insurance businesses that the combined effect of IFRS 9 and the new IFRS on Insurance Contracts could cause.
Our Insurance Accounting Newsletter series (IAN) summaries the debates as well as tentative decisions taken by the Boards, up to and including those on 30 November 2011.
- August 2011: The post-Tweedie insurance project: an uncertain horizon
Despite assurance to the contrary, progress has slowed dramatically, with only three meetings being held in the past two months. In addition, the target publication date of the final standard has been further delayed into the second half of 2012, and there is very likely to be a re-exposure of the standard prior to its final issuance. In the meetings on 13 June, 15 June and 21 July, new disagreements between the two Boards emerged, adding further obstacles to achieving a converged solution. Key topics discussed were the residual margin, acquisition costs, presentation of insurance contracts in the statement of comprehensive income and short-duration contracts. After the IASB August recess, the Boards intend to meet more frequently in an effort to finalise the remaining issues.
- June 2011 - Progress continues, divergence remains
The IASB and the FASB resumed their joint deliberations after the pause for reflection. A number of tentative decisions were made, some of which delivered disappointing disagreements between the two Boards.
Topics covered included short-term duration contracts, accounting mismatch, unbundling, margins and purchased reinsurance accounting.
- May 2011: Project timetable extended by a few additional months
The joint meetings between the two Boards have continued with reduced pace in April after a very intense push during February and March.
The plan for the next few months seems uncertain though, in view of a podcast released by the chairmen of the two Boards indicating that the insurance project may be pushed out a number of months to allow for a satisfactory resolution of all the remaining issues.
Apart from this delay, the Boards appear to be continuing to build consensus on the shape of the final standard. With the exception of unbundling, always a contentious topic, the Boards have agreed several topics including explicit risk adjustments, contract boundaries, bifurcation of embedded derivatives and top-down discount rates.
Our Insurance Accounting Newsletter series (IAN) summarises the debates as well as tentative decisions taken by the Boards, up to and including those on 15 April 2011.
- April 2011: “Unsuccessful efforts” split the Boards
The progress of the joint project on insurance accounting has hit the first stumbling block as the Boards disagreed on how to account for distribution costs incurred to add new business to insurance portfolios.
- March 2011: Gearing up for the last mile
The six months since our last Insurance Accounting Newsletter mostly coincided with the comment period on the International Accounting Standard Board (IASB) Exposure Draft (ED) on the new International Financial Reporting Standard (IFRS) for Insurance Contracts. At the end of this period the IASB received over 250 comment letters from insurance companies, accounting and actuarial firms, insurance and security regulators and several other stakeholders around the world.
- August 2010: The start of a new accounting era
On 30th July the IASB published its Exposure Draft of the new IFRS for insurance contracts. This is a major milestone in the creation of an improved reporting standard for insurance under International Standards.
- July 2010: Last minute convergence
Following several meetings in June between the IASB and FASB (Insurance Accounting Standards Board and Financial Accounting Standards Board), a number of long standing disagreements between the Boards were resolved. Of particular interest, the important issues of acquisition costs and participating contracts were discussed and agreement was reached.
- July 2010: Almost there...
The Insurance Accounting Standards Board and the Financial Accounting Standards Board (IASB and FASB) continue to meet and managed to address most of the remaining issues to be covered by the Exposure Draft.
- June 2010: Steady if slow progress
The Insurance Accounting Standards Board and the Financial Accounting Standards Board (IASB and FASB) continue to focus on insurance accounting with sessions over recent months dedicated to insurance matters to meet their Exposure Draft publication deadline target.
- May 2010: Standard setting crunch time
After an intense schedule of joint meetings discussing insurance in March, it now seems unlikely that the Exposure Draft (ED) on insurance accounting will be published in May as planned.
- April 2010: Insurance accounting taking shape
The Insurance Accounting Standards Board and the Financial Accounting Standards Board (IASB and FASB) both continue to focus on insurance accounting with several sessions dedicated to insurance over recent months to meet the publication deadline target. I attach two further issues of our Deloitte Insurance Accounting Newsletter to keep you updated on the latest developments in the IFRS Insurance Contracts accounting project.
- 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.