INFORMATION FOR OBSERVERS

Size: px
Start display at page:

Download "INFORMATION FOR OBSERVERS"

Transcription

1 30 Cannon Street, London EC4M 6XH, England International Phone: +44 (20) , Fax: +44 (20) Accounting Standards Website: Board This document is provided as a convenience to observers at IASB meetings, to assist them in following the Board s discussion. It does not represent an official position of the IASB. Board positions are set out in Standards. INFORMATION FOR OBSERVERS BOARD MEETING: PROJECT: SEPTEMBER 2004, LONDON INSURANCE CONTRACTS (PHASE II) As preliminary preparation before restarting phase II later this year, the Board will continue its discussion of general educational material on the nature of insurance contracts and current accounting models for insurance contracts. The material is attached. The same material was used for the July meeting. No decisions are expected.

2 INTRODUCTION 1. The Board last discussed issues in Phase 2 of the insurance project in January In this paper, we plan to place the important recognition and measurement issues in the context of two simple examples. We plan to avoid arguing the issues in this meeting, at least, to the extent that we can resist the temptation. Our objective is to use two very basic (primary school) examples to highlight both computations and conceptual issues. We hope that this basic introduction will provide grounding for the discussions that follow and initial meetings with the working party appointed to help on this project. 2. Board members who wish to supplement their reading (and gain extra credit) should review Volume 2 of the IASC Issues Paper on Insurance, especially Appendix A, and the FASB publication, A Primer on Accounting Models for Long-Duration Life Insurance Contracts under U.S. GAAP. The staff has copies. 3. A word of warning before we proceed. The two examples presented in this paper are very basic and sometimes include unrealistic terms or assumptions. There are several reasons why we chose to simplify. The most important of those was our desire to focus on the accounting dynamics. We wanted to show the accounting effects of different decisions that the Board might make. Our experience is that simple, even unrealistic, examples are the best way to illustrate the basic debits and credits. 4. We have received a number of studies that examine the impact of different accounting models on reporting by both general and life insurance entities. We are currently considering how the groups that commissioned those studies might best discuss them with the Board. The staff designed the illustrations in this paper as a foundation for studies of real-world effects. We have found that one cannot appreciate the complicated without first understanding the simple. 5. In the staff s view, the Board must resolve recognition and measurement issues in 11 topic areas to move this project forward. Those issues are: Page 1

3 a. Model. Should the Board create a single model for all contracts, or different models for different types of contracts? Should the accounting model be based on direct measurements of contract assets and liabilities, on deferral and matching of contract revenues and expenses, or some combination of the two? In previous discussions, some Board members questioned the usefulness of this distinction. The staff considers it important to keep the two opposing philosophies in clear focus, especially in view of developments in the revenue recognition project. b. Measurement. Should an asset-and-liability model use measurements based on fair value, entity-specific value, or some combination of measurement attributes? If the measurement attribute is fair value, should it be a business-to-customer measurement (customer consideration) or a business-to-business measurement (legal layoff). Should the measurement address options or guarantees embedded in a contract? c. Discounting. Should the measurement of some or all amounts recognised in the balance sheet be based on their present values? d. Asset/Liability interaction. Should the measurement model incorporate expectations about asset performance in determining the carrying amount of the contract liability? e. Risk/Service adjustment. How should the accounting model approach the question of risk (or service) adjustment? f. Gain or loss on initial measurement/liability recognition. Should the accounting model be constructed in a manner that prohibits or significantly limits the recognition of net profit or loss on initial recognition? g. Policyholder behaviour. Should the accounting model incorporate expectations about cash inflows and outflows that are a consequence of policyholder renewals or cancellations of an insurance contract? h. Acquisition costs. Should the accounting model require costs incurred to acquire new insurance contracts to be capitalised as assets and amortised? Page 2

4 i. Unbundling. Should the measurement model unbundle the individual elements of an insurance contract and measure them individually? j. Participating contracts. How should the insurer s liability to holders of participating contracts be recognised and measured? k. Credit standing. Should the measurement include the effects of the entity s credit standing? 6. Most of the issues above are present in either an asset-and-liability or deferral-andmatching accounting model. If the Board adopts a formula-based or deferral-andmatching model, there are two additional issues: a. Attribution model. How should the accounting model attribute revenues and expenses to individual periods covered by the contract? b. Changes in estimate. How should the accounting model deal with changes in interest rates and estimates of future cash flows? Should a different approach be applied to differences between amounts realised in the current period and amounts previously estimated? 7. This paper touches on all of the above issues except for unbundling, participating contracts, and credit standing. CASE 1, A SIMPLE GENERAL INSURANCE CONTRACT 8. The insurer sells 1,000 contracts for a premium of $1,000 each. For purposes of illustration, all premiums are collected and sales commissions paid on 1 July X1. All claims are paid on 30 June X2. The insurer pays commissions of $100 for each contract and expects claims (on average) of $800 per contract. Any individual policyholder may have several claims (or none) during the contract period the contract has no maximum payout. The contract is not cancellable by either the insurer or the policyholder (an unrealistic assumption to be corrected later). For now, we will ignore discounting in the measurement of amounts reported in the balance sheet. Page 3

5 Deferral-and-Matching Analysis 9. On initial recognition, the insurer has deferred (or unearned) revenue of $1,000,000 and deferred acquisition costs of $100,000. The journal entries are reproduced below: dr. cr. Cash 1,000,000 Unearned premium revenue 1,000,000 To record receipt of premiums Deferred acquisition costs 100,000 Cash 100,000 To record payment of sales commissions Asset-and-Liability Analysis 10. The insurer has no obligation to pay refunds, because policyholders cannot cancel their contracts. The insurer has an obligation to stand-ready to pay all valid claims submitted by policyholders. As analysed in the revenue-recognition project and the Board s work on IAS 37, a stand-ready obligation meets the Framework s definition of a liability. It is a present obligation (to stand ready), arising from a past event (the contract), that will result in an outflow of resources embodying economic benefits (the services required by the contract). While the payment of claims is conditional, and the payment to any individual policyholder is not probable, the services required by the contract (standing ready) are 100% probable. The liability thus passes the Framework s first recognition criterion. The obligation is measurable, although the selection of measurement attributes is an open issue. 11. When a policyholder submits a claim, a new obligation to deliver cash is created, but the unexpired stand-ready obligation remains in place. 12. The acquisition costs do not represent an asset per se; costs are not assets. Arguably, the costs represent the amount paid to acquire a customer-relationship intangible asset. We will return to acquisition costs shortly. 13. Assuming, for the moment, that the insurer s stand-ready obligation is measured at the expected amount of claims paid, the journal entries on initial recognition are as follows: Page 4

6 dr. cr. Cash 1,000,000 Stand-ready obligation 800,000 Premium revenue 200,000 To record receipt of premiums Acquisition cost expense 100,000 Cash 100,000 To record payment of sales commissions Issue in Context: Gain on Initial Recognition/Liability Measurement 14. The $100,000 net profit shown above is a gain on sale or selling profit, but it is incomplete. Board members and constituents have expressed concern about the up-front recognition of profit, especially in a business as fundamentally uncertain as insurance. However, from an asset-and-liability perspective, recognition of net profit on initial recognition is a symptom. The problem, if there is one, lies in the measurement of the insurer s obligation to stand ready. 15. Under some interpretations of IAS 37, Provisions, Contingent Liabilities and Contingent Assets, $800,000 represents the amount that the insurer would rationally pay to settle this obligation. (FASB pronouncements describe this as the cost accumulation measurement of the obligation.) However, no rational reinsurer would accept the obligation in exchange for a payment of $800,000. Nor would the insurer sell new contracts for a net premium of $800,000. There is always the chance, maybe the significant chance, of claims in excess of $800,000. The value of the obligation must be something more than $800, The DSOP proposed a bottom-up approach to the liability measurement. To measure the insurer s stand-ready obligation, the insurer would estimate the expected amount of claims ($800,000) and add a market-based risk margin. For example, the insurer might study the market and determine that most insurers demand a margin or markup (referred to in the DSOP as a market value margin or MVM) equal to 1.5 standard deviations above the expected amount of claims. If the result of that exercise was $875,000, the insurer would recognise profit on initial recognition of $25,000. If the result was $925,000, the insurer would recognise a loss on initial recognition. Page 5

7 17. There are several strong arguments in favour of the bottom-up approach. a. It is generally consistent with the measurement guidance (on risk) in IAS 37 and FASB Concepts Statement No. 7. The notion of measurement using a riskadjusted cash-flow estimate is familiar and has intuitive appeal. b. The resulting liability measurement is independent of the insurer s acquisition costs. c. Some companies interviewed in field visits said that implementing a similar approach for financial reporting has also improved management information. 18. However, constituents have a number of strong objections: a. Computing a market value margin of this sort is unfamiliar to many insurers. Many will not know where to begin. b. In the absence of observed prices, the right margin is hard to determine. Any IFRS will therefore require considerable implementation guidance. c. The nature and objective of the market value margin is not clear, especially if the measurement attribute is other than fair value. Is the margin based on a capital market notion that includes only unsystematic risk, or a broader concept that encompasses all types of risk, servicing, and profit margin? 19. In the earlier round of insurance deliberations, Board members and staff discussed a topdown approach. To measure the liability, the insurer would assume, absent information to the contrary, that the net premium charged (gross premium less acquisition costs) represents the fair value of the liability at initial recognition. This assumption is based on the premise that no other insurer would accept the obligation for less than the amount charged by the insurer. We note that this approach is similar to proposals for measurement in the revenue recognition project (when there is no information about the legal layoff amount). 20. The principal advantage of the top-down approach is simplicity, at least on initial recognition. In particular, the approach does not attempt to identify components of the Page 6

8 markup inherent in the price (premium) of the contract. However, this approach also has several pitfalls: a. Some might argue that it places undue emphasis on pricing policy, which is often the most aggressive part of the business. Pricing changes over the course of an insurance cycle, even though expected claims may not. b. Some constituents have expressed concern that preparers might use the top-down approach as a shield against recognising losses on initial recognition. This is especially true when pricing incorporates expectations about future asset earning rates. c. The liability measurement is not independent of the insurer s acquisition cost structure. d. In some jurisdictions, pricing is subject to significant regulatory intervention. 21. We will return to measurement several times in the course of our discussions. Assuming, for now, that the insurer determines that the markup in this contract is 12.5% 1 on expected claims of $800,000 (a measurement of $900,000), the insurer s journal entries on initial recognition would be as follows: dr. cr. Cash 1,000,000 Stand-ready obligation 900,000 Premium revenue 100,000 To record receipt of premiums Acquisition cost expense 100,000 Cash 100,000 To record payment of sales commissions 22. A note on the revenue line is in order here. We have adopted an approach that reports revenue in a manner similar to the traditional presentation by non-life insurance 1 We will use this 12.5% markup throughout this paper, in order to keep the illustrations comparative. Page 7

9 companies. This is similar to the approach taken in the revenue-recognition project, but not by design. Issue in Context: Policyholder Behaviour 23. The scenario for Case 1 built on a contract that is not cancellable by either the insurer or the policyholder. Suppose instead that the policyholder could cancel the contract at any time and receive a refund of 95% of unexpired premiums, based on straight-line expiration of premiums over the one-year contract term. On initial recognition, the refundable premium ($950,000) exceeds the asset-and-liability method s measurement of the stand-ready obligation and the deferral-and-matching method s net liability (unearned premiums less deferred acquisition costs). 24. To date, the Board has discussed policyholder behaviour in the context of future premium payments in a life insurance contract. In the staff s view, future premiums and policyholder cancellations of existing prepaid contracts raise the same question. Can the liability (gross or net) be less than the amount that would be payable if policyholders exercise their option to cancel the contract? Taken another step, if the policyholder has no right to cancel, can the measurement of the contract ever be a debit? 25. The Issues Paper recommended that the liability for life insurance contracts should never be less than the amount that policyholders could demand on surrender, referred to as the deposit floor. It did not include a similar recommendation for general insurance, but this was due to oversight rather than intent. The DSOP reversed that recommendation. IAS 39, if extended to insurance contracts, would require a deposit floor. 26. A liability measurement with a deposit floor raises some interesting recognition questions, including: a. The deposit-floor measurement reflects the fair value of the obligation in a particular transaction, cancellation, between the insurer and an individual policyholder. It does not reflect the value at which one would expect the book of contracts to exchange between the insurer and another insurer. b. The deposit-floor measurement has the effect of recognising the entire possible surrender penalty as income on initial recognition. Page 8

10 c. Despite b., the deposit-floor measurement produces a loss on initial recognition whenever the gross amount of the possible surrender penalties is less than the insurer s acquisition costs. d. Owing to c., deposit-floor measurements focus attention on acquisition costs and their possible capitalisation. Issue in Context: Acquisition Costs 27. Both the Issues Paper and the DSOP recommended that acquisition costs be charged to expense when incurred. The Steering Committee reasoned that the costs do not meet the Framework definition of an asset. 28. Capitalising acquisition costs and amortising them over the premium term is consistent with the underlying rationale for a deferral-and-matching system. Capitalising recognises costs and revenues over the period covered by the contract. 29. The argument for capitalisation in an asset-and-liability system is less obvious. Some arguments for capitalisation include: a. The Insurance Working Group of the German Accounting Standards Board argued that acquisition costs should be capitalised, Due to their character as prepaid expenses,... b. While acquisition costs are not assets in their own right, they represent investment in the insurance contract. As long as the contract is expected to produce a net profit, that investment should be reported as an asset. c. Acquisition costs represent an intangible asset the insurer s relationship with the policyholder. d. Financial statement users are very interested in the insurer s cost structure. Acquisition costs are an important indicator of how the insurer conducts its activities. Page 9

11 CASE 1A, SUBSEQUENT RECOGNITION AND MEASUREMENT 30. At December 31, the insurer estimates incurred claims for 6 months at $400,000. Based on available information, the insurer concludes that nothing has changed that would cause it to revise either its expectations about the remaining contract term or the prices it would charge for new contracts with a six-month period. The insurer invests net premiums in corporate bonds that pay interest at 10%, with a semi-annual coupon. For purposes of illustration, the insurer does not reinvest the coupon payment. 31. At June 30 of the following year, actual claim payments on claims for the full year equal $800,000. Deferral and Matching Analysis Under most deferral-and-matching approaches, the insurer amortises unearned premium and deferred costs rateably over the period, unless the pattern of exposure is not level over the period. Claims are recognised as incurred. The deferral-and-matching journal entries at December 31 and June 30 are: Formatted: Bullets and Numbering Page 10

12 At December 31 dr. cr. Cash and investments 45,000 Interest income 45,000 To record interest earned on investments Unearned premium revenue 500,000 Premium revenue 500,000 To record premium revenue earned Acquisition costs 50,000 Deferred acquisition costs 50,000 To record amortisation of acquisition costs Claims expense 400,000 Claims payable 400,000 To record claims incurred At June 30 Cash and investments 45,000 Interest income 45,000 To record interest earned on investments Unearned premium revenue 500,000 Premium revenue 500,000 To record premium revenue earned Acquisition costs 50,000 Deferred acquisition costs 50,000 To record amortisation of acquisition costs Claims expense 400,000 Claims payable 400,000 To record claims incurred Claims payable 800,000 Cash and investments 800,000 To record claims paid A Note on Names The Insurance Issues Paper observed that most accounting systems include a mixture Formatted: Bullets and Numbering of conventions. The label deferral-and-matching, then, is not completely descriptive. In the example above, claims payable is a liability, not a deferral, and the measurement is based on claims incurred. If the incurred claims had been $425,000 or $375,000, the insurer would have recorded that amount as the liability. The staff is not aware of any situation in which existing accounting models would allow the insurer to defer a $25,000 Page 11

13 loss or to record additional claims of $25,000 in an attempt to normalise expense over the year. Asset-and-Liability Analysis At December 31, the insurer has two liabilities. The first is a stand-ready obligation for the remaining six months of the contract. The second is a liability for incurred claims arising between July 1 and December 31. The insurer demands a markup on both liabilities, but in different ways. After examining available information, the insurer concludes that it would demand a markup on incurred claims equal to one third of the amount demanded for the stand-ready obligation. Just as the insurer would not accept new policies at the amount of expected claims, it would not accept an obligation for incurred claims at their expected amount. The insurer, or another insurer assuming this obligation, would demand a markup. This produces a measurement for incurred claims of $416,667 ($400,000 expected plus $16,667 markup of % 2 ) and for the stand-ready obligation of $450,000 ($400,000 expected plus $50,000 markup of 12.5%). The insurer s journal entries (still ignoring discounting) at December 31 and June 30 are: Formatted: Bullets and Numbering 2 One-third of 12.5%. Page 12

14 At December 31 dr. cr. Cash and investments 45,000 Interest income 45,000 To record interest earned on investments Stand-ready obligation 450,000 Premium revenue 450,000 To record premium revenue Claims expense 416,667 Incurred claims obligation 416,667 To record claims incurred At June 30 Cash and investments 45,000 Interest income 45,000 To record interest earned on investments Stand-ready obligation 450,000 Premium revenue 450,000 To record premium revenue Claims expense 416,667 Incurred claims obligation 416,667 To record claims incurred Incurred claims obligation 833,334 Cash and investments 800,000 Claims expense 33,334 To record claims paid Page 13

15 Case 1A, Financial Statements Compared Deferral and Matching, Case 1A dr. (cr.) 1-Jul 31-Dec 30-Jun Cash and investments Beginning balance - 900, ,000 Premiums received 1,000, Sales commissions paid (100,000) - - Claims paid - - (800,000) Investment earnings - 45,000 45,000 Ending balance 900, , ,000 Balance sheets Cash and investments 900, , ,000 Deferred acquisition costs 100,000 50,000 - Unearned Premium (1,000,000) (500,000) Claims payable - (400,000) - (Equity)/Deficit - (95,000) (190,000) Income statements Premium revenue - (500,000) (500,000) Investment income - (45,000) (45,000) Acquisition cost expense - 50,000 50,000 Claims expense - 400, ,000 Net (income)/loss - (95,000) (95,000) Page 14

16 Asset and Liability, Case 1A dr. (cr.) 1-Jul 31-Dec 30-Jun Cash and investments Beginning balance - 900, ,000 Premiums received 1,000, Sales commissions paid (100,000) - - Claims paid - - (800,000) Investment earnings - 45,000 45,000 Ending balance 900, , ,000 Balance sheets Cash and investments 900, , ,000 Deferred acquisition costs Stand-ready obligation (900,000) (450,000) - Incurred claims obligation - (416,667) - (Equity)/Deficit - (78,333) (190,000) Income statements Premium revenue (100,000) (450,000) (450,000) Investment income - (45,000) (45,000) Acquisition cost expense 100, Claims expense - 416, ,333 Net (income)/loss - (78,333) (111,667) Analysis of insurance liabilities Stand-ready obligation Beginning balance - (900,000) (450,000) Expected claim payments (800,000) Addition to markup (100,000) Adjustment to remeasure obligation - 400, ,000 Release of markup - 50,000 50,000 Addition to markup Ending balance (900,000) (450,000) - Incurred claims obligation Beginning balance - - (416,667) Incurred claims - (400,000) (400,000) Addition to markup - (16,667) (16,667) Claims paid ,000 Release of markup ,334 Ending balance - (416,667) - Page 15

17 Observation In practice, an insurer following traditional approaches might (or might not) measure the incurred-claims liability at the same $416,667 portrayed above. Management might argue that the additional $16,667 is necessary to produce a prudent measure of the liability, especially if the $400,000 is the most likely amount rather than an expected value. Such an explicit adjustment is contrary to US GAAP (FASB Statement No. 5, Accounting for Contingencies). Issues in Context: Discounting and Asset/Liability Interaction Cases 1 and 1A use measurements that ignore the time value of money. The Issues Paper and DSOP both recommend that liabilities be measured at the present values of expected cash flows. IAS 37 and FASB Concepts Statement No. 7 also require liabilities to be measured at their present value. Existing deferral-and-matching systems usually ignore discounting in the amortisation of unearned revenue and deferred costs, although it could be incorporated in the amortisation scheme. Formatted: Bullets and Numbering Formatted: Bullets and Numbering Applying discounting leads naturally to the question of a rate and of the interaction between asset and liability discount rates. In Case 1A, we assumed that the insurer invests available cash in instruments earning 10%. Many would argue that the same rate should be used to apply present value techniques to the insurance liabilities. The Issues Paper, DSOP, IAS 19, IAS 37, and FASB Concepts Statement 7 all argue that the rate earned on assets held by the entity should not be used to measure liabilities. CASE 2, ADVERSE DEVELOPMENT Insurance executives often say that there are few good surprises in general insurance. Estimates turn out to have been over-optimistic far more often than they turn out to have been over-pessimistic. In Case 2, we examine a situation in which incurred claims at December 31 are estimated at $450,000. The insurer estimates that this experience is likely to persist and at June 30 that revised estimate proves to be correct; the insurer pays $900,000 of claims. Deferral-and-Matching Analysis Most deferral-and-matching schemes include a loss-recognition principle, similar to the onerous-contract provisions of IAS 37. However, this case does not present the Formatted: Bullets and Numbering Formatted: Bullets and Numbering Page 16

18 insurer with a loss; it is a break-even scenario. Accordingly, the insurer would continue the accounting described in Case 1A, with the exception of the higher incurred claims at December 31. The insurer s journal entries are: At December 31 dr. cr. Cash and investments 45,000 Interest income 45,000 To record interest earned on investments Unearned premium revenue 500,000 Premium revenue 500,000 To record premium revenue earned Acquisition costs 50,000 Deferred acquisition costs 50,000 To record amortisation of acquisition costs Claims expense 450,000 Claims payable 450,000 To record claims incurred At June 30 Cash and investments 45,000 Interest income 45,000 To record interest earned on investments Unearned premium revenue 500,000 Premium revenue 500,000 To record premium revenue earned Acquisition costs 50,000 Deferred acquisition costs 50,000 To record amortisation of acquisition costs Claims expense 450,000 Claims payable 450,000 To record claims incurred Claims payable 900,000 Cash and investments 900,000 To record claims paid Asset-and-Liability Analysis The insurer concludes that the incurred claims, while higher than expected, would Formatted: Bullets and Numbering demand the same percentage markup as those described in Case 1A. Accordingly, the Page 17

19 liability for incurred claims is $468,750 ($450,000 plus a % proportional risk adjustment of $18,750). The liability for unexpired risk presents a different problem. The insurer would not write new contracts at a net premium of $900,000 if it expected claims of the same amount. Assuming again that the expected claims are higher than in Case 1A but otherwise similar, the insurer would demand an annual net premium of $1,012,500 (expected claims of $900,000 plus a 12.5% markup). For a six-month contract, this would be a premium of $506,250. To aid in understanding, we have presented the adjustment to the stand-ready obligation as a separate account. The insurer s journal entries are: Page 18

20 At December 31 dr. cr. Cash and investments 45,000 Interest income 45,000 To record interest earned on investments Stand-ready obligation 450,000 Premium revenue 450,000 To record premium revenue Claims expense 468,750 Incurred claims obligation 468,750 To record claims incurred Addition to stand-ready obligation 56,250 Stand-ready obligation 56,250 To record remeasurement of obligation At June 30 Cash and investments 45,000 Interest income 45,000 To record interest earned on investments Stand-ready obligation 506,250 Premium revenue 506,250 To record premium revenue Claims expense 468,750 Incurred claims obligation 468,750 To record claims incurred Incurred claims obligation 937,500 Cash and investments 900,000 Claims expense 37,500 To record claims paid Page 19

21 Case 2, Financial Statements Compared Deferral and Matching, Case 2, Adverse Development dr. (cr.) 1-Jul 31-Dec 30-Jun Cash and investments Beginning balance - 900, ,000 Premiums received 1,000, Sales commissions paid (100,000) - - Claims paid - - (900,000) Investment earnings - 45,000 45,000 Ending balance 900, ,000 90,000 Balance sheets Cash and investments 900, ,000 90,000 Deferred acquisition costs 100,000 50,000 - Unearned Premium (1,000,000) (500,000) Claims payable - (450,000) - (Equity)/Deficit - (45,000) (90,000) Income statements Premium revenue - (500,000) (500,000) Investment income - (45,000) (45,000) Acquisition cost expense - 50,000 50,000 Claims expense - 450, ,000 Net (income)/loss - (45,000) (45,000) Page 20

22 Asset and Liability, Case 2, Adverse Development dr. (cr.) 1-Jul 31-Dec 30-Jun Cash and investments Beginning balance - 900, ,000 Premiums received 1,000, Sales commissions paid (100,000) - - Claims paid - - (900,000) Investment earnings - 45,000 45,000 Ending balance 900, ,000 90,000 Balance sheets Cash and investments 900, ,000 90,000 Deferred acquisition costs Stand-ready obligation (900,000) (506,250) - Incurred claims obligation - (468,750) - (Equity)/Deficit - 30,000 (90,000) Income statements Premium revenue (100,000) (450,000) (506,250) Investment income - (45,000) (45,000) Addition to stand-ready obligation 56,250 Acquisition cost expense 100, Claims expense - 468, ,250 Net (income)/loss - 30,000 (120,000) Analysis of insurance liabilities Stand-ready obligation Beginning balance - (900,000) (506,250) Expected claim payments (800,000) (50,000) Addition to markup (100,000) Adjustment to remeasure obligation - 400, ,000 Release of markup - 50,000 56,250 Addition to markup - (6,250) - Ending balance (900,000) (506,250) - Incurred claims obligation Beginning balance - - (468,750) Incurred claims - (450,000) (450,000) Addition to markup - (18,750) (18,750) Claims paid ,000 Release of markup ,500 Ending balance - (468,750) - Page 21

23 Issue in Context: Measurement Case 2 raises a fundamental measurement issue. Does the measurement of a liability always include the compensation (the markup) that an entity demands for assuming an obligation? Formatted: Bullets and Numbering Before answering that question, we need to be clear about what we mean by a markup. We assume that the unadjusted measurements presented throughout this paper reflect expected cash flows; the probability-weighted average of various scenarios. The idea of a markup is predicated on the notion that an insurer (or any other entity) would not willingly accept an obligation for an amount equal to its expected value. Even if actual results equal the expected cash flows, the insurer would demand an additional amount for issuing the contract, including a price for the risk involved and providing the service of diversifying risks that an individual policyholder cannot diversify. 43. In the deferral-and-matching financial statements on page 20, the answer to the question posed in paragraph 41 is No. Neither the liability for incurred claims nor unearned revenue is adjusted for a markup (beyond the amount that was implicit in the original premium). This is consistent with a general, though rarely articulated, accounting convention that an entity should not record losses in one period in the expectation of profits in a future period. For example, paragraph 36 of FASB Statement No. 60 includes the following injunction, No loss shall be reported currently if it results in creating future income. 44. In the asset-and-liability example on page 21, the answer to the question posed in paragraph 41 is Yes. While the result may seem contrary to traditional accounting intuition, the result portrayed in this example is consistent with liability measurements based on market transactions (either premiums that would be charged by the insurer or amounts that would be demanded by an assuming company). It is also consistent with the conceptual measurement framework in FASB Concepts Statement 7. The argument, more fully articulated elsewhere, is that an uncertain liability should be reported at an amount that does represents either: a. the amount at which the obligation could be settled, or Page 22

24 b. the amount that the insurer would demand to accept that liability from a policyholder or another insurer. CASE 3, A MULTI-PERIOD CONTRACT 45. In this case, the insurer enters into a contract for 3 years. It sells 1,000 contracts for an annual premium of $1,000. We make the following assumptions about this contract: a. Expected average claims are $800, $950, and $1,150 per contract in force in years 1, 2, and 3 respectively. b. The insurer cannot cancel or reprice the contract, but policyholders can cancel at any anniversary date. A policyholder who cancels receives no refund. The insurer expects 15% of policyholders to cancel each year. c. Premiums are paid on January 1 of each year. Claims are paid on December 31 of each year. d. Case 3 ignores both discounting and the insurer s investment of available assets. 46. In the multi-period contract, we have dropped the journal entries and substituted computations of the insurance liability and, if necessary, deferred acquisition costs. Deferral-and-Matching Analysis 47. Many deferral-and-matching models (like US GAAP) are designed to report net profit that equals a constant percentage of premium inflows. Future premium inflows and claim outflows are inherent in that design. The computations necessary to implement this approach are presented below: Page 23

25 Development of Percentages -- Case 3 Acq. Costs Liability Total expected claims 2,437,800 Costs incurred 100,000 Total premiums expected 2,572,000 2,572,000 Amortisation rate 3.888% % Runoff of Balances Contract Liability Deferred Acq. Costs 1-Jan-02 Costs incurred 100,000 Premiums received (1,000,000) (1,000,000) Times percentage % (947,823) 3.888% (38,880) 31-Dec-02 Claims paid 800,000 - Balance at year end (147,823) 61,120 1-Jan-03 Premiums received (850,000) (850,000) Times percentage % (805,649) 3.888% (33,048) 31-Dec-03 Claims paid 807,500 - Balance at year end (145,972) 28,072 1-Jan-04 Premiums received (722,000) (722,000) Times percentage % (684,328) 3.888% (28,072) 31-Dec-04 Claims paid 830,300 - Balance at year end - (0) Page 24

26 48. The resulting financial statements are: Deferral and Matching -- Case 3 dr. (cr.) 1-Jan Dec Dec Dec-04 Contracts in force 1,000 1, Claims per Contract ,150 Cash and investments Beginning balance , ,500 Premiums received 1,000,000 1,000, , ,000 Sales commissions paid (100,000) (100,000) - - Claims paid - (800,000) (807,500) (830,300) Investment earnings Ending balance 900, , ,500 34,200 Balance sheets Cash and investments 900, , ,500 34,200 Deferred acquisition costs 61,120 61,120 28,072 - Contract liability (947,823) (147,823) (145,972) (Equity)/Deficit (13,297) (13,297) (24,600) (34,200) Income statements Premium revenue (1,000,000) (1,000,000) (850,000) (722,000) Investment income Acquisition cost expense 38,880 38,880 33,048 28,072 Addition to contract liability 947, , , , Net (income)/loss (13,297) (13,297) (11,302) (9,600) As a percentage of premium revenue 1.33% 1.33% 1.33% Page 25

27 CASE 3A: DISCOUNTING AND INVESTMENT 49. Of course, no insurer would sell a product that returns only 1.33% of premiums. Indeed, if Case 3 had ignored policyholder cancellations, the contract would have been breakeven on an undiscounted basis. That is, expected claims and acquisition expenses would have equalled gross premiums. An insurer prices a policy like this one in expectation of investment earnings and deferral-and-matching systems incorporate discounting into the accounting model. In Case 3A, we make two additional assumptions: a. The insurer invests available cash in risk-free bonds paying an annual coupon of 8% (remember rates that high?) and the accounting model applies discounting at that rate. b. The insurer distributes cash equal to reported earnings from the book at the end of each year. This assumed distribution should not be confused with a dividend distribution to owners. It is a computational device designed to eliminate reinvestment of earnings from the illustration. 50. The computations to implement these new assumptions are: Page 26

28 Development of Percentages -- Case 3A, Discounting Acq. Costs Liability Present value of expected claims 2,092,161 Costs incurred 100,000 Present value of expected premiums 2,406,036 2,406,036 Amortisation rate 4.156% % Runoff of Balances Contract Liability Deferred Acq. Costs 1-Jan-02 Costs incurred 100,000 Premiums received (1,000,000) (1,000,000) Times percentage % (869,547) 4.156% (41,562) 31-Dec-02 Interest accretion (69,564) 4,675 Claims paid 800,000 - Balance at year end (139,111) 63,113 1-Jan-03 Premiums received (850,000) (850,000) Times percentage % (739,115) 4.156% (35,328) 31-Dec-03 Interest accretion (70,258) 2,223 Claims paid 807,500 - Balance at year end (140,983) 30,008 1-Jan-04 Premiums received (722,000) (722,000) Times percentage % (627,813) 4.156% (30,008) 31-Dec-04 Interest accretion (61,504) - Claims paid 830,300 - Balance at year end - (0) Page 27

29 51. The resulting financial statements are: Deferral and Matching -- Case 3A, Discounting dr. (cr.) 1-Jan Dec Dec Dec-04 Contracts in force 1,000 1, Claims per Contract ,150 Cash and investments Beginning balance , ,976 Premiums received 1,000,000 1,000, , ,000 Sales commissions paid (100,000) (100,000) - - Claims paid - (800,000) (807,500) (830,300) Investment earnings - 72,000 74,080 66,638 Distribution - (96,002) (81,602) (69,314) Ending balance 900,000 75, ,976 - Balance sheets Cash and investments 900,000 75, ,976 - Deferred acquisition costs 58,438 63,113 30,008 (0) Contract liability (869,547) (139,111) (140,983) (Equity)/Deficit (88,891) (0) - 0 Income statements Premium revenue (1,000,000) (1,000,000) (850,000) (722,000) Investment income - (72,000) (74,080) (66,638) Acquisition cost expense 41,562 36,887 33,105 30,008 Addition to contract liability 869, , , , Net (income)/loss (88,891) (96,002) (81,602) (69,314) As a percentage of premium revenue 9.60% 9.60% 9.60% Page 28

30 Issue in Context: Asset/Liability Interaction 52. Many insurance professionals and actuaries argue that insurers rarely invest in risk-free instruments. They maintain that the computations portrayed here should reflect the rates that the insurer expects to earn on investments. Stated differently, they view the accounting objective as one that encompasses all of the flows that are connected with the insurance activity, including assets and liabilities, rather than one that focuses on the matching of contract revenues and costs alone. 53. Computationally, using asset-based discount rates poses no particular problem. If the insurer invests in bonds that pay an annual coupon of 10% rather than the 8% risk-free rate, we simply use the higher rate in applying the computations. 3 The resulting net income would then be a constant 11.65% of premiums received. Asset-and-Liability Analysis 54. The asset-and-liability approach proposed in the Issues Paper and DSOP measures the contract liability at the present value of risk-adjusted cash flows, including future premium inflows and claim outflows arising from policyholder renewals. In this paper, we have replaced the risk-adjustment with a markup. Present value is computed using a risk-free discount rate, regardless of the insurer s investment strategy. For purposes of comparability, we have assumed that the insurer invests at the same rate used to compute the liability. As in earlier illustrations, the insurer uses a 12.5% markup on expected claims. Computations of the liability are: 3 A logically consistent application of this approach would use the coupon rate net of expected defaults. The staff understands that practice in many cases does not make that adjustment. Page 29

31 Stand-Ready Obligation, Asset and Liability, Case 3A With Without Markup Markup 1-Jan-02 PV of expected claims (2,353,681) (2,092,161) PV of expected premiums 1,406,036 1,406,036 (947,645) (686,125) 31-Dec-02 PV of expected claims (1,641,975) (1,459,534) PV of expected premiums 1,518,519 1,518,519 Balance at year end (123,457) 58, Dec-03 PV of expected claims (864,896) (768,796) PV of expected premiums 722, ,000 Balance at year end (142,896) (46,796) Page 30

32 The resulting financial statements are: Asset and Liability, Case 3A dr. (cr.) 1-Jan Dec Dec Dec-04 Contracts in force 1,000 1, Claims per Contract ,150 Expected claims, incl markup (900,000) (908,438) (934,088) Cash and investments Beginning balance , ,896 Premiums received 1,000,000 1,000, , ,000 Sales commissions paid (100,000) (100,000) - - Claims paid - (800,000) (807,500) (830,300) Investment earnings - 72,000 77,877 69,192 Distribution - (48,543) (100,938) (103,788) Ending balance 900, , ,896 - Balance sheets Cash and investments 900, , ,896 - Deferred acquisition costs Stand-ready obligation (947,645) (123,457) (142,896) (Equity)/Deficit 47, Income statements Premium revenue (1,000,000) (1,000,000) (850,000) (722,000) Investment income - (72,000) (77,877) (69,192) Acquisition cost expense 100, , Change in stand-ready obligation 947, ,457 19,439 (142,896) Claims paid - 800, , ,300 Net (income)/loss 47,645 (48,543) (100,938) (103,788) Analysis of Stand-Ready Obligation Beginning balance - (947,645) (123,457) (142,896) Premiums received (1,000,000) - (850,000) (722,000) Interest accretion - (75,812) (77,877) (69,192) PV of expected claim payments (2,092,161) PV of expected premiums 2,406, Addition to markup (261,520) Claims paid - 800, , ,300 Release of markup - 100, , ,788 Ending balance (947,645) (123,457) (142,896) (0) Page 31

33 Observation 55. During Board discussions in 2002, some Board members observed that the example did not show the now-infamous debit that has troubled some Board members. That is, the illustrations do not introduce the possibility that measurement of the insurance contract might result in a net debit, rather than the expected credit. The sequence of transactions obscures the fact that the illustration does show the debit (future premiums in excess of future claims). At time zero, before receipt of the first annual premium, the present value of expected future premiums is $2,406,036. The present value of expected future claims (including markup) is $2,353,681 (2,092,161 plus 261,520). The loss shown in the first column represents the acquisition costs of $100,000 less the difference between the $2,406,036 and the $2,353,681 or $47, The contract measurement changes from debit to credit as soon as the first premium is received, but the computation (and the underlying recognition principles) remain. If we had illustrated a contract with 36 monthly premiums rather than 3 annual premiums, the contract measurement would have been a debit for several months before turning to a net credit. CASE 3B: ADVERSE DEVELOPMENT 57. Case 3B shows the effect of adverse development in a multi-period model. The contract is the same as portrayed in Case 3A. At the end of 2003, the management revises its estimates of 2004 (the last year of the contract). Management now estimates that lapse rates will decline. Instead of 722 continuing policyholders, management now expects 800 to continue. Management also expects claims to exceed the earlier estimates. Instead of an average of $1,150 per contract, management now expects claims to average $1,225 per contract. In insurance jargon, policyholders have selected against the insurer. Management does not expect any change in interest rates and would not demand a markup different from the original 12.5 percent, despite the changing circumstances. Deferral-and-Matching Analysis 58. As mentioned in earlier Board papers, there are a variety of approaches to changes in estimate in a deferral-and-matching framework. The Insurance Issues Paper (sub-issue 6G, paragraphs ) listed four approaches consistent with a deferral-and-matching framework prospective, catch-up, retrospective, and lock-in. Depending on the type of Page 32

34 contract, U.S. GAAP requires catch-up, retrospective, or lock-in. We have illustrated application of the lock-in approach in this paper. Changes in estimates are not recognised in the current period unless the change would result in a reported loss in some future period. 59. As in Case 2 (page 16), if the revised estimates come to pass (and we assume here that they do), the insurer will not show a loss in any year. Accordingly, the carrying amount of the contract liability and deferred acquisition costs are not adjusted. The effects of increased policyholder persistency (fewer lapses) and increased claims are reported as they occur in The resulting financial statements are: Page 33

35 Deferral and Matching -- Case 3B, Adverse Development dr. (cr.) 1-Jan Dec Dec Dec-04 Contracts in force 1,000 1, Claims per Contract ,225 Cash and investments Beginning balance , ,976 Premiums received 1,000,000 1,000, , ,000 Sales commissions paid (100,000) (100,000) - - Claims paid - (800,000) (807,500) (980,000) Investment earnings - 72,000 74,080 72,878 Distribution - (96,002) (81,602) (3,854) Ending balance 900,000 75, ,976 0 Balance sheets Cash and investments 900,000 75, ,976 0 Deferred acquisition costs 58,438 63,113 30,008 - Contract liability (869,547) (139,111) (140,983) (Equity)/Deficit (88,891) (0) - (0) Income statements Premium revenue (1,000,000) (1,000,000) (850,000) (800,000) Investment income - (72,000) (74,080) (72,878) Acquisition cost expense 41,562 36,887 33,105 30,008 Change in contract liability 869, ,111 1,873 (140,983) Claims paid - 800, , ,000 Net (income)/loss (88,891) (96,002) (81,602) (3,854) As a percentage of premium revenue 9.60% 9.60% 0.48% Page 34

36 Asset-and-Liability Analysis 60. The asset-and-liability approach demands that the insurer measure its liabilities in terms of a price. That price may be the amount that the insurer would demand for new contracts with similar estimated claims and policyholder persistency or the price that others would demand to relieve the insurer from its obligation; the Board has yet to decide. In either case, the measurement is a fresh-start that does not incorporate previous carrying amounts or accounting conventions. 61. In this case, as in Case 2A, we have assumed that the insurer would charge a different premium when confronted with the new information about We have also assumed that the insurer would demand the same 12.5 percent markup in setting that premium. In previous discussions, some Board members observed that this approach has the effect of recognising a loss in the current year and normalising gross profit in a future year. That is the effect, but not the objective. The objective is to find a relevant price at which the liability would transact in a marketplace. Any price would include a markup, because rational business people do not accept uncertainty and provide service for free. 62. The financial statements resulting from an asset-and-liability approach (with explanatory note following are: Page 35

37 Asset and Liability, Case 3B dr. (cr.) 1-Jan Dec Dec Dec-04 Contracts in force 1,000 1, Claims per Contract ,225 Risk adjusted claims (900,000) (908,438) (1,102,500) Cash and investments Beginning balance , ,833 Premiums received 1,000,000 1,000, , ,000 Sales commissions paid (100,000) (100,000) - - Claims paid - (800,000) (807,500) (980,000) Investment earnings - 72,000 77,877 81,667 Distribution - (48,543) (23,000) (122,500) Ending balance 900, , ,833 - Balance sheets Cash and investments 900, , ,833 - Deferred acquisition costs Contract liability (947,645) (123,457) (220,833) (Equity)/Deficit 47, Income statements Premium revenue (1,000,000) (1,000,000) (850,000) (800,000) Investment income - (72,000) (77,877) (81,667) Acquisition cost expense 100, , Change in contract liability 947, ,457 97,377 (220,833) Claims paid - 800, , ,000 Net (income)/loss 47,645 (48,543) (23,000) (122,500) Analysis of Stand-Ready Obligation Beginning balance - (947,645) (123,457) (220,833) Premiums received (1,000,000) - (850,000) (800,000) Interest accretion - (75,812) (77,877) (81,667) PV of expected claim payments (2,092,161) - (138,611) - PV of expected premiums 2,406,036-78,000 - Addition to markup (261,520) - (17,326) - Claims paid - 800, , ,000 Release of markup - 100, , ,500 Ending balance (947,645) (123,457) (220,833) (0) Page 36

INFORMATION FOR OBSERVERS. IASB Meeting: Insurance Working Group, April 2008 Paper: Non-life insurance contracts (Agenda paper 6)

INFORMATION FOR OBSERVERS. IASB Meeting: Insurance Working Group, April 2008 Paper: Non-life insurance contracts (Agenda paper 6) 30 Cannon Street, London EC4M 6XH, England International Phone: +44 (0)20 7246 6410, Fax: +44 (0)20 7246 6411 Accounting Standards Email: iasb@iasb.org.uk Website: http://www.iasb.org Board This document

More information

November 2007. Comment Letter. Discussion Paper: Preliminary Views on Insurance Contracts

November 2007. Comment Letter. Discussion Paper: Preliminary Views on Insurance Contracts November 2007 Comment Letter Discussion Paper: Preliminary Views on Insurance Contracts The Austrian Financial Reporting and Auditing Committee (AFRAC) is the privately organised standard-setting body

More information

INFORMATION FOR OBSERVERS. Life insurance Accounting approaches: summary table. Approach D Current exit value Yes (though if

INFORMATION FOR OBSERVERS. Life insurance Accounting approaches: summary table. Approach D Current exit value Yes (though if 30 Cannon Street, London EC4M 6XH, England International Phone: +44 (0)20 7246 6410, Fax: +44 (0)20 7246 6411 Accounting Standards Email: iasb@iasb.org Website: http://www.iasb.org Board INFORMATION FOR

More information

11B 11B. IASB/FASB Meeting July 2009. Unearned premium model. Purpose of this paper

11B 11B. IASB/FASB Meeting July 2009. Unearned premium model. Purpose of this paper IASB/FASB Meeting July 2009 IASB agenda reference FASB memo reference 11B 11B Contact(s) Sandra Hack shack@iasb.org +44 (0)20 7246 6488 Hans van der Veen hvanderveen@iasb.org +44 (0)20 7246 6464 Jeffrey

More information

Contact(s) Joanna Yeoh jyeoh@iifrs.org +44 (0)20 7246 6481 Brian North bnorth@fasb.org +1 203 956-5266. Unbundling investment components

Contact(s) Joanna Yeoh jyeoh@iifrs.org +44 (0)20 7246 6481 Brian North bnorth@fasb.org +1 203 956-5266. Unbundling investment components IASB/FASB Meeting 4 May 2011 IASB Agenda reference 1E FASB Agenda Staff Paper reference 66E Contact(s) Joanna Yeoh jyeoh@iifrs.org +44 (0)20 7246 6481 Brian North bnorth@fasb.org +1 203 956-5266 Project

More information

Short Duration Contracts: Modified Approach. Comparison of the modified approach to current GAAP

Short Duration Contracts: Modified Approach. Comparison of the modified approach to current GAAP IASB/FASB Meeting 27 April 2011 IASB Agenda reference 1 FASB Agenda Staff Paper reference 65 Contact(s) Jennifer Weiner jmweiner@fasb.org +1 (203) 956-5305 Shayne Kuhanek skuhaneck@fasb.org +1 (203) 956-3458

More information

Comment on the Exposure Draft Insurance Contracts

Comment on the Exposure Draft Insurance Contracts 30 November 2010 International Accounting Standards Board 30 Cannon Street London EC4M 6XH United Kingdom Dear Sir or Madame, Comment on the Exposure Draft Insurance Contracts We appreciate the longstanding

More information

Insurance Contracts Project Update

Insurance Contracts Project Update International Financial Reporting Standards Insurance Contracts Project Update March 2015 The views expressed in this presentation are those of the presenter, not necessarily those of the IASB or IFRS

More information

Insurance Contracts Overview of FASB DP and IASB ED

Insurance Contracts Overview of FASB DP and IASB ED 1 Insurance Contracts Overview of FASB DP and IASB ED Moderator: Marc F. Oberholtzer, FCAS, MAAA, PricewaterhouseCoopers Presenter: Akwasi A. Ampofo, FASB Project Manager Disclaimer 2 This document has

More information

INFORMATION FOR OBSERVERS. Project: Insurance contracts (phase II) (Agenda Papers 4G, 4H, 4I)

INFORMATION FOR OBSERVERS. Project: Insurance contracts (phase II) (Agenda Papers 4G, 4H, 4I) 30 Cannon Street, London EC4M 6XH, United Kingdom Phone: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 Email: iasb@iasb.org Website: http://www.iasb.org International Accounting Standards Board This document

More information

IAS 37 Provisions, Contingent liabilities and Contingent Assets IFRIC Interpretation X Levies

IAS 37 Provisions, Contingent liabilities and Contingent Assets IFRIC Interpretation X Levies STAFF PAPER IFRS Interpretations Committee Meeting November 2012 Project Paper topic IAS 37 Provisions, Contingent liabilities and Contingent Assets CONTACT(S) Patrick Le Flao pleflao@ifrs.org +44 (0)20

More information

Preliminary Views on Insurance Contracts Part 1: Invitation to Comment and main text Comments to be submitted by 16 November 2007

Preliminary Views on Insurance Contracts Part 1: Invitation to Comment and main text Comments to be submitted by 16 November 2007 May 2007 DISCUSSION PAPER Preliminary Views on Insurance Contracts Part 1: Invitation to Comment and main text Comments to be submitted by 16 November 2007 DISCUSSION PAPER Preliminary Views on Insurance

More information

Staff Paper. IASB Meeting Agenda reference 4C. Deposit floor for Insurance Contracts

Staff Paper. IASB Meeting Agenda reference 4C. Deposit floor for Insurance Contracts IASB Meeting Agenda reference 4C Staff Paper Date October 2009 Contact(s) Hans van der Veen hvanderveen@iasb.org +44 (0)20 7246 6464 Project Topic Insurance contracts Deposit floor for Insurance Contracts

More information

Life Insurance Contracts

Life Insurance Contracts Compiled AASB Standard AASB 1038 Life Insurance Contracts This compiled Standard applies to annual reporting periods beginning on or after 1 January 2011 but before 1 January 2013. Early application is

More information

IASB/FASB Meeting Week beginning 11 April 2011. Top down approaches to discount rates

IASB/FASB Meeting Week beginning 11 April 2011. Top down approaches to discount rates IASB/FASB Meeting Week beginning 11 April 2011 IASB Agenda reference 5A FASB Agenda Staff Paper reference 63A Contacts Matthias Zeitler mzeitler@iasb.org +44 (0)20 7246 6453 Shayne Kuhaneck skuhaneck@fasb.org

More information

Life Insurance Contracts

Life Insurance Contracts Compiled Accounting Standard AASB 1038 Life Insurance Contracts This compilation was prepared on 23 September taking into account amendments made up to and including 15 September 2005. Prepared by the

More information

INFORMATION FOR OBSERVERS. Project: Insurance contracts (phase II) (Agenda Papers 4A, 4B, 4C)

INFORMATION FOR OBSERVERS. Project: Insurance contracts (phase II) (Agenda Papers 4A, 4B, 4C) 30 Cannon Street, London EC4M 6XH, United Kingdom Phone: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 Email: iasb@iasb.org Website: http://www.iasb.org International Accounting Standards Board This document

More information

Life insurance accounting models: Overview of papers (agenda paper 9)

Life insurance accounting models: Overview of papers (agenda paper 9) 30 Cannon Street, London EC4M 6XH, England International Phone: +44 (0)20 7246 6410, Fax: +44 (0)20 7246 6411 Accounting Standards Email: iasb@iasb.org Website: http://www.iasb.org Board This document

More information

INFORMATION FOR OBSERVERS. Regulatory assets and liabilities Staff analysis and recommendation (Agenda Paper 6)

INFORMATION FOR OBSERVERS. Regulatory assets and liabilities Staff analysis and recommendation (Agenda Paper 6) 30 Cannon Street, London EC4M 6XH, United Kingdom Tel: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 E-mail: iasb@iasb.org Website: www.iasb.org International Accounting Standards Board This observer note

More information

IASP 6. Prepared by the Subcommittee on Actuarial Standards of the Committee on Insurance Accounting. Published 16 June 2005

IASP 6. Prepared by the Subcommittee on Actuarial Standards of the Committee on Insurance Accounting. Published 16 June 2005 International Actuarial Association Association Actuarielle Internationale IASP 6 Liability Adequacy Testing, Testing for Recoverability of Deferred Transaction Costs, and under International Financial

More information

INSURANCE. Moving towards global insurance accounting

INSURANCE. Moving towards global insurance accounting IFRS NEWSLETTER INSURANCE Issue 31, November 2012 The redeliberations are winding down, with an exposure draft in sight next year. Field and user input will be key in evaluating the operationality of the

More information

Australian Accounting Standards Board (AASB)

Australian Accounting Standards Board (AASB) Standards Board () FACT SHEET September 2011 1038 Life Insurance Contracts (This fact sheet is based on the standard as at 1 January 2011.) Important note: This standard is an Australian specific standard

More information

IAS 19 Employee Benefits Discount rate for defined benefit liability: pre-tax rate or post-tax rate?

IAS 19 Employee Benefits Discount rate for defined benefit liability: pre-tax rate or post-tax rate? STAFF PAPER IFRS Interpretations Committee Meeting March 2013 Project IAS 19 Employee Benefits Discount rate for defined benefit liability: pre-tax rate or post-tax rate? CONTACT(S) Leonardo Piombino lpiombino@ifrs.org

More information

Guidance notes for application of AASB 1023: General Insurance Contracts to Registered Health Benefit Organisations.

Guidance notes for application of AASB 1023: General Insurance Contracts to Registered Health Benefit Organisations. Guidance notes for application of AASB 1023: General Insurance Contracts to Registered Health Benefit Organisations. 28 TH OCTOBER 2005 TABLE OF CONTENTS TABLE OF CONTENTS... 2 INTRODUCTION... 3 INSURANCE

More information

30 Cannon Street, London EC4M 6XH, England Phone: +44 (0)20 7246 6410, Fax: +44 (0)20 7246 6411 Email: iasb@iasb.org.uk Website: http://www.iasb.

30 Cannon Street, London EC4M 6XH, England Phone: +44 (0)20 7246 6410, Fax: +44 (0)20 7246 6411 Email: iasb@iasb.org.uk Website: http://www.iasb. 30 Cannon Street, London EC4M 6XH, England Phone: +44 (0)20 7246 6410, Fax: +44 (0)20 7246 6411 Email: iasb@iasb.org.uk Website: http://www.iasb.org International Accounting Standards Board This document

More information

Australian Accounting Standards Board (AASB)

Australian Accounting Standards Board (AASB) FACT SHEET September 2011 1023 General Insurance Contracts (This fact sheet is based on the standard as at 1 January 2011.) Important note: This standard is an Australian specific standard with no international

More information

(c) Are insurance contracts monetary items? (paragraphs 13-14)

(c) Are insurance contracts monetary items? (paragraphs 13-14) IASB/FASB Meeting June 2010 week beginning 14 June IASB agenda reference FASB memo reference 2D 50D Project Topic Insurance Contracts Foreign currency cash flows Purpose of this paper 1. This paper deals

More information

IFRS Practice Issues for Banks: Loan acquisition accounting

IFRS Practice Issues for Banks: Loan acquisition accounting IFRS Practice Issues for Banks: Loan acquisition accounting August 2011 kpmg.com/ifrs Contents 1. Addressing complexity in loan acquisitions 1 2. When should the acquisition of a loan be recognised in

More information

Accounting proposals for insurance contracts

Accounting proposals for insurance contracts International Financial Reporting Standards Accounting proposals for insurance contracts The views expressed in this presentation are those of the presenter, not necessarily those of the IASB or IFRS Foundation.

More information

Project to replace IFRS 4 Insurance contracts

Project to replace IFRS 4 Insurance contracts International Financial Reporting Standards Project to replace IFRS 4 Insurance contracts (IFRS x) Executive IFRS workshop for Regulators Diplomatic Academy of Vienna Darrel Scott, IASB member Andrea Pryde,

More information

How To Write A Financial Statement

How To Write A Financial Statement March 2015 Project Update Insurance Contracts without Participation Features Insurance contracts without participation features What is the purpose of this document? This document provides an update on

More information

ORIGINAL PRONOUNCEMENTS

ORIGINAL PRONOUNCEMENTS Financial Accounting Standards Board ORIGINAL PRONOUNCEMENTS AS AMENDED Statement of Financial Accounting Concepts No. 7 Using Cash Flow Information and Present Value in Accounting Measurements Copyright

More information

www.pwc.com/ifrs Revised exposure draft will significantly change accounting for insurance contracts

www.pwc.com/ifrs Revised exposure draft will significantly change accounting for insurance contracts Revised exposure draft will significantly change accounting for insurance contracts August 2013 Revised exposure draft will significantly change accounting for insurance contracts Contents Introduction

More information

provide a summary of the previous meetings discussions on this issue;

provide a summary of the previous meetings discussions on this issue; STAFF PAPER January 2012 IFRS Interpretations Committee Meeting IFRS IC meetings: May, Nov 2011 Board meeting: Sep 2011 Project Paper topic IAS 28 Investments in Associates and Joint Ventures Application

More information

IFRS 2 Share-Based Payment Share-based payment transactions where the manner of settlement is contingent on future events

IFRS 2 Share-Based Payment Share-based payment transactions where the manner of settlement is contingent on future events STAFF PAPER IFRS Interpretations Committee Meeting 10 11 September 2013 Project Paper topic IFRS 2 Share-Based Payment Share-based payment transactions where the manner of settlement is contingent on future

More information

Insurance Contract Boundaries - Proposal to replace the guaranteed insurability criteria

Insurance Contract Boundaries - Proposal to replace the guaranteed insurability criteria Insurance Contract Boundaries - Proposal to replace the guaranteed insurability criteria Background The IASB s Discussion Paper Preliminary Views on Insurance Contracts (the Discussion Paper) addressed

More information

Snapshot: Insurance Contracts

Snapshot: Insurance Contracts July 2010 Exposure Draft Snapshot: Insurance Contracts This snapshot is a brief introduction to the exposure draft Insurance Contracts. It provides an overview of the main proposals published for public

More information

when an insurer should first recognise an insurance contract. Agenda paper 11B (FASB Memorandum 44B) discusses this question.

when an insurer should first recognise an insurance contract. Agenda paper 11B (FASB Memorandum 44B) discusses this question. IASB Meeting -week beginning 19 April 2010 FASB Meeting TBC IASB agenda reference FASB memo reference 11A 44A Project Topic Insurance contracts Contract boundaries Purpose of this paper 1. This paper asks

More information

Insurance Accounting AUDIT COMMITTEE NEWS. Financial Reporting. Edition 43 / Q4 2013

Insurance Accounting AUDIT COMMITTEE NEWS. Financial Reporting. Edition 43 / Q4 2013 AUDIT COMMITTEE NEWS Edition 43 / Q4 2013 Insurance Accounting Financial Reporting In June 2013 the IASB issued a revised exposure draft (ED) of its proposal for a financial reporting standard on Insurance

More information

EXPOSURE DRAFT FINANCIAL REPORTING BUSINESS COMBINATIONS (IFRS 3) & AMENDMENTS TO FRS 2 ACCOUNTING FOR SUBSIDIARY UNDERTAKINGS

EXPOSURE DRAFT FINANCIAL REPORTING BUSINESS COMBINATIONS (IFRS 3) & AMENDMENTS TO FRS 2 ACCOUNTING FOR SUBSIDIARY UNDERTAKINGS ACCOUNTING STANDARDS BOARD JULY 2005 FRED 36 36 BUSINESS COMBINATIONS (IFRS 3) & AMENDMENTS TO FRS 2 ACCOUNTING FOR SUBSIDIARY UNDERTAKINGS (PARTS OF IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS)

More information

Chapter 3. Adjusting the accounts. Appendix 3A: An alternative method of recording deferrals

Chapter 3. Adjusting the accounts. Appendix 3A: An alternative method of recording deferrals 1 Chapter 3 Adjusting the accounts Appendix 3A: An alternative method of recording deferrals 2 Learning objectives 1. Prepare adjusting entries for prepaid expenses originally recorded in an expense account

More information

Changes in Accounting Policies under International Financial Reporting Standards IFRS [2005]

Changes in Accounting Policies under International Financial Reporting Standards IFRS [2005] IAN 8 Changes in Accounting Policies under International Financial Reporting Standards IFRS [2005] Prepared by the Subcommittee on Education and Practice of the Committee on Insurance Accounting Published

More information

sets out the next steps of the project (in paragraph 7); and

sets out the next steps of the project (in paragraph 7); and IASB Agenda ref 2 STAFF PAPER REG IASB Meeting Project Paper topic Insurance Contracts Cover Note September 2015 CONTACT(S) Andrea Pryde apryde@ifrs.org +44 (0)20 7246 6957 Joanna Yeoh jyeoh@ifrs.org +44

More information

IFRS 4 Fáze II aneb dočkáme se konce nekonečného příběhu? Hana Havlíčková 4. října 2013, SAV, Praha

IFRS 4 Fáze II aneb dočkáme se konce nekonečného příběhu? Hana Havlíčková 4. října 2013, SAV, Praha IFRS 4 Fáze II aneb dočkáme se konce nekonečného příběhu? Hana Havlíčková 4. října 2013, SAV, Praha IFRS 4 Phase II Agenda Introduction Definitions & Scope Measurement IFRS 4 ED Open Issues Appendix: Solvency

More information

IASB/FASB Meeting Week beginning 16 May 2011. 1. This paper discusses the accounting for reinsurance and asks the boards to decide whether to:

IASB/FASB Meeting Week beginning 16 May 2011. 1. This paper discusses the accounting for reinsurance and asks the boards to decide whether to: IASB/FASB Meeting Week beginning 16 May 2011 IASB Agenda reference 3J FASB Agenda Staff Paper reference 68J Contact(s) Jennifer Weiner jmweiner@fasb.org +1 (203) 956-5305 Adam Lindemuth alindemuth@fasb.org

More information

IAA PAPER FUTURE INVESTMENT MARGINS

IAA PAPER FUTURE INVESTMENT MARGINS The preliminary views of the Steering Committee in its Insurance Issues Paper (the IASC Paper) indicate that there has been significant disagreement within the Steering Committee as to whether to reflect

More information

Presentation in statement of comprehensive income comparison of methods

Presentation in statement of comprehensive income comparison of methods IASB Agenda ref 2A STAFF PAPER 15-18 October 2012 REG FASB IASB Meeting Project Paper topic Insurance contracts Presentation in statement of comprehensive income comparison of methods CONTACT(S) Joan Brown

More information

IFRS 13 Fair Value Measurement

IFRS 13 Fair Value Measurement May 2011 International Financial Reporting Standard IFRS 13 Fair Value Measurement International Financial Reporting Standard 13 Fair Value Measurement IFRS 13 Fair Value Measurement is issued by the International

More information

International Financial Reporting Standard 4

International Financial Reporting Standard 4 International Financial Reporting Standard 4 Insurance Contracts In March 2004 the International Accounting Standards Board (IASB) issued IFRS 4 Insurance Contracts. In August 2005 the IASB amended the

More information

Practical guide to IFRS

Practical guide to IFRS pwc.com/ifrs Practical guide to IFRS The art and science of contingent consideration in a business combination February 2012 Contents Introduction 1 Practical questions and examples 3 1 Initial classification

More information

Business Combinations

Business Combinations Compiled Accounting Standard AASB 3 Business Combinations This compilation was prepared on 6 March 2006 taking into account amendments made up to and including 22 June 2005. Prepared by the staff of the

More information

INFORMATION FOR OBSERVERS. Gaming Transactions (Agenda Paper 11(i))

INFORMATION FOR OBSERVERS. Gaming Transactions (Agenda Paper 11(i)) 30 Cannon Street, London EC4M 6XH, United Kingdom Tel: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 Email: iasb@iasb.org Website: www.iasb.org International Accounting Standards Board This observer note

More information

Liability Adequacy Test in AASB 1023 General Insurance Contracts

Liability Adequacy Test in AASB 1023 General Insurance Contracts Invitation to Comment March 2005 Liability Adequacy Test in AASB 1023 General Insurance Contracts Prepared by the Australian Accounting Standards Board Commenting on this Invitation to Comment The AASB

More information

INFORMATION FOR OBSERVERS. Project: Insurance contracts (phase II) (Agenda Papers 4D, 4E, 4F)

INFORMATION FOR OBSERVERS. Project: Insurance contracts (phase II) (Agenda Papers 4D, 4E, 4F) 30 Cannon Street, London EC4M 6XH, United Kingdom Phone: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 Email: iasb@iasb.org Website: http://www.iasb.org International Accounting Standards Board This document

More information

NEPAL ACCOUNTING STANDARDS ON BUSINESS COMBINATIONS

NEPAL ACCOUNTING STANDARDS ON BUSINESS COMBINATIONS NAS 21 NEPAL ACCOUNTING STANDARDS ON BUSINESS COMBINATIONS CONTENTS Paragraphs OBJECTIVE 1 SCOPE 2-14 Identifying a business combination 5-10 Business combinations involving entities under common control

More information

Dumfries Mutual Insurance Company Financial Statements For the year ended December 31, 2010

Dumfries Mutual Insurance Company Financial Statements For the year ended December 31, 2010 Dumfries Mutual Insurance Company Financial Statements For the year ended December 31, 2010 Contents Independent Auditors' Report 2 Financial Statements Balance Sheet 3 Statement of Operations and Unappropriated

More information

IASB/FASB Meeting Week beginning 14 February 2011. Discounting Non-life Contract Liabilities

IASB/FASB Meeting Week beginning 14 February 2011. Discounting Non-life Contract Liabilities IASB/FASB Meeting Week beginning 14 February 2011 IASB Agenda reference 3E FASB Agenda Staff Paper reference 58E IASB Contact(s) Matthias Zeitler mzeitler@iasb.org +44 (0)20 7246 6453 FASB Contact(s) Shayne

More information

International Financial Reporting Standard 4 Insurance Contracts

International Financial Reporting Standard 4 Insurance Contracts International Financial Reporting Standard 4 Insurance Contracts Objective 1 The objective of this IFRS is to specify the financial reporting for insurance contracts by any entity that issues such contracts

More information

Life Insurance Business

Life Insurance Business Accounting Standard AASB 1038 November 1998 Life Insurance Business Issued by the Australian Accounting Standards Board Obtaining a Copy of this Accounting Standard Copies of this Standard are available

More information

GRF_115_1: Premiums Liabilities - Insurance Risk Charge

GRF_115_1: Premiums Liabilities - Insurance Risk Charge GRF_115_1: Premiums Liabilities - Insurance Risk Charge These instructions must be read in conjunction with the general instruction guide. Explanatory notes Direct business Sections 1A, 1B and 1C are to

More information

IASB Agenda Ref 16A. FASB Memo No. 140A. Issue Date September 11, 2015. Meeting Date September 23, 2015. Assistant Director

IASB Agenda Ref 16A. FASB Memo No. 140A. Issue Date September 11, 2015. Meeting Date September 23, 2015. Assistant Director Memo IASB Agenda Ref 16A FASB Memo No. 140A Issue Date September 11, 2015 Meeting Date September 23, 2015 Contact(s) Alex Casas Author / Project Lead Peter Proestakes Assistant Director Project Topic Insurance

More information

Re: Exposure Draft of Proposed Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IAS 19 Employee Benefits

Re: Exposure Draft of Proposed Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IAS 19 Employee Benefits TP PT PT Members Organización Internacional de Comisiones de Valores International Organisation of Securities Commissions Organisation internationale des commissions de valeurs Organização Internacional

More information

IFRS: Insurance and Investment Contracts. IAS39 Taskforce

IFRS: Insurance and Investment Contracts. IAS39 Taskforce IFRS: Insurance and Investment Contracts IAS39 Taskforce Adoption of IFRS Australia will adopt IFRS for reporting periods beginning on or after 1 January 2005. AASB Standards are being changed to adopt

More information

New Zealand Equivalent to International Accounting Standard 17 Leases (NZ IAS 17)

New Zealand Equivalent to International Accounting Standard 17 Leases (NZ IAS 17) New Zealand Equivalent to International Accounting Standard 17 Leases (NZ IAS 17) Issued November 2004 and incorporates amendments up to October 2010 This Standard was issued by the Financial Reporting

More information

Indian Accounting Standard (Ind AS) 104 Insurance Contracts

Indian Accounting Standard (Ind AS) 104 Insurance Contracts Indian Accounting Standard (Ind AS) 104 Insurance Contracts Contents OBJECTIVE 1 SCOPE 2 12 Embedded derivatives 7 9 Unbundling of deposit components 10 12 RECOGNITION AND MEASUREMENT 13 35 Temporary exemption

More information

DRAFT COMMENT LETTER Comments should be sent to Commentletters@efrag.org by 6 July 2010

DRAFT COMMENT LETTER Comments should be sent to Commentletters@efrag.org by 6 July 2010 DRAFT COMMENT LETTER Comments should be sent to Commentletters@efrag.org by 6 July 2010 XX July 2010 International Accounting Standards Board 30 Cannon Street London EC4M 6XH United Kingdom Dear Sir/ Madam

More information

ED191 sub 2. 19 March 2010. Kevin Stevenson Chairman Australian Accounting Standards Board PO Box 204 Collins St West MELBOURNE VIC 8007

ED191 sub 2. 19 March 2010. Kevin Stevenson Chairman Australian Accounting Standards Board PO Box 204 Collins St West MELBOURNE VIC 8007 ED191 sub 2 19 March 2010 Kevin Stevenson Chairman Australian Accounting Standards Board PO Box 204 Collins St West MELBOURNE VIC 8007 Email: standard@aasb.gov.au Dear Kevin Comments on Exposure Draft

More information

Rate used to accrete interest and calculate the present value of cash flows that unlock the contractual service margin

Rate used to accrete interest and calculate the present value of cash flows that unlock the contractual service margin IASB Agenda ref 2B STAFF PAPER REG IASB Meeting Project Paper topic Insurance contracts July 2014 Rate used to accrete interest and calculate the present value of cash flows that CONTACT(S) Izabela Ruta

More information

Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model

Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model No. US2014-01 (supplement) June 18, 2014 What s inside: Overview... 1 Identifying performance obligations...

More information

Impairment of Assets

Impairment of Assets Compiled AASB Standard AASB 136 Impairment of Assets This compiled Standard applies to annual reporting periods beginning on or after 1 January 2010. Early application is permitted. It incorporates relevant

More information

INFORMATION FOR OBSERVERS. Project: IAS 19 Employee Benefits Settlements (Agenda Paper 7A)

INFORMATION FOR OBSERVERS. Project: IAS 19 Employee Benefits Settlements (Agenda Paper 7A) 30 Cannon Street, London EC4M 6XH, United Kingdom Tel: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 E-mail: iasb@iasb.org Website: www.iasb.org International Accounting Standards Board This observer note

More information

International Financial Reporting for Insurers. August 19-21, 2013. Hong Kong. Session 8: IFRS 4 Phase 2 Insurance Contract Model.

International Financial Reporting for Insurers. August 19-21, 2013. Hong Kong. Session 8: IFRS 4 Phase 2 Insurance Contract Model. International Financial Reporting for Insurers August 19-21, 2013 Hong Kong Session 8: IFRS 4 Phase 2 Insurance Contract Model Darryl Wagner Session 8 IFRS 4 Phase 2 Insurance Contract t Model Darryl Wagner,

More information

Insurance Contracts. June 2013 Illustrative Examples Exposure Draft ED/2013/7 A revision of ED/2010/8 Insurance Contracts

Insurance Contracts. June 2013 Illustrative Examples Exposure Draft ED/2013/7 A revision of ED/2010/8 Insurance Contracts June 2013 Illustrative Examples Exposure Draft ED/2013/7 A revision of ED/2010/8 Insurance Contracts Insurance Contracts Comments to be received by 25 October 2013 Illustrative Examples on Exposure Draft

More information

31Z_07_08. Conseil National de la Comptabilité

31Z_07_08. Conseil National de la Comptabilité 31Z_07_08 Conseil National de la Comptabilité 3, Boulevard Diderot 75572 PARIS CEDEX 12 Paris, May 2007 Téléphone 01.53.44.52.01 Télécopie 01 53 18 99 43 / 01 53 44 52 33 Internet http://www.cnc.minefi.gouv.fr/

More information

TABLE OF CONTENTS. Executive Summary 3. Introduction 5. Purposes of the Joint Research Project 6

TABLE OF CONTENTS. Executive Summary 3. Introduction 5. Purposes of the Joint Research Project 6 TABLE OF CONTENTS Executive Summary 3 Introduction 5 Purposes of the Joint Research Project 6 Background 7 1. Contract and timeframe illustrated 7 2. Liability measurement bases 9 3. Earnings 10 Consideration

More information

Sri Lanka Accounting Standard-SLFRS 4. Insurance Contracts

Sri Lanka Accounting Standard-SLFRS 4. Insurance Contracts Sri Lanka Accounting Standard-SLFRS 4 Insurance Contracts -175- EFFECTIVE DATE AND TRANSITION 40 45 Disclosure 42 44 Redesignation of financial assets 45 APPENDICES A Defined terms B Definition of an insurance

More information

a. any change in the defined benefit obligation on settlement b. any change in the plan assets on settlement and

a. any change in the defined benefit obligation on settlement b. any change in the plan assets on settlement and 30 Cannon Street, London EC4M 6XH, United Kingdom Tel: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 E-mail: iasb@iasb.org Website: www.iasb.org International Accounting Standards Board This observer note

More information

INFORMATION FOR OBSERVERS. Project: IAS 39 and Business Combinations (Agenda Paper 7E)

INFORMATION FOR OBSERVERS. Project: IAS 39 and Business Combinations (Agenda Paper 7E) 30 Cannon Street, London EC4M 6XH, United Kingdom Tel: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 E-mail: iasb@iasb.org Website: www.iasb.org International Accounting Standards Board This observer note

More information

Fair value of insurance liabilities: unit linked / variable business

Fair value of insurance liabilities: unit linked / variable business Fair value of insurance liabilities: unit linked / variable business The fair value treatment of unit linked / variable business differs from that of the traditional policies; below a description of a

More information

IFRS 15 Revenue from Contracts with Customers

IFRS 15 Revenue from Contracts with Customers May 2014 International Financial Reporting Standard IFRS 15 Revenue from Contracts with Customers International Financial Reporting Standard 15 Revenue from Contracts with Customers IFRS 15 Revenue from

More information

Insurance alert FASB Board Meeting Contracts March 7, 2012

Insurance alert FASB Board Meeting Contracts March 7, 2012 www.pwc.com/us/insurance Insurance alert FASB Board Meeting Contracts March 7, 2012 Insurance Since a variety of viewpoints are discussed at FASB and IASB meetings, and it is often difficult to characterize

More information

2. This paper supplements Agenda Paper 2A Outreach and comment letter analysis for this meeting. This paper does not ask any questions.

2. This paper supplements Agenda Paper 2A Outreach and comment letter analysis for this meeting. This paper does not ask any questions. IASB Agenda ref 2B STAFF PAPER REG IASB Meeting Project Insurance contracts Paper topic Feedback from users of financial statements January 2014 CONTACT(S) Izabela Ruta iruta@ifrs.org +44 (0)20 7246 6957

More information

NEED TO KNOW. IFRS 9 Financial Instruments Impairment of Financial Assets

NEED TO KNOW. IFRS 9 Financial Instruments Impairment of Financial Assets NEED TO KNOW IFRS 9 Financial Instruments Impairment of Financial Assets 2 IFRS 9 FINANCIAL INSTRUMENTS IMPAIRMENT OF FINANCIAL ASSETS IFRS 9 FINANCIAL INSTRUMENTS IMPAIRMENT OF FINANCIAL ASSETS 3 TABLE

More information

IPSAS 13 LEASES Acknowledgment

IPSAS 13 LEASES Acknowledgment IPSAS 13 LEASES Acknowledgment This International Public Sector Accounting Standard is drawn primarily from International Accounting Standard (IAS) 17 (revised 2003), Leases published by the International

More information

Classification of a financial instrument that is mandatorily convertible into a variable number of shares upon a contingent non-viability event

Classification of a financial instrument that is mandatorily convertible into a variable number of shares upon a contingent non-viability event STAFF PAPER IFRS Interpretations Committee Meeting July 2013 Project Paper topic New item for initial consideration Classification of a financial instrument that is mandatorily convertible into a variable

More information

IFRS industry insights

IFRS industry insights IFRS Global Office Issue 1, April 2012 IFRS industry insights IASB issues a revised exposure draft on revenue recognition insights for the financial services industry The revised ED is the next step in

More information

Insurance Contracts 1

Insurance Contracts 1 Indian Accounting Standard (Ind AS) 104 Insurance Contracts 1 (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate

More information

IFRS 4 (Phase II) for Insurance Contracts. Revised exposure draft explained through an illustrative example

IFRS 4 (Phase II) for Insurance Contracts. Revised exposure draft explained through an illustrative example IFRS 4 (Phase II) for Insurance Contracts Revised exposure draft explained through an illustrative example Dirk Vlaminckx Christophe Vandeweghe Bert Lievens 9 October 2013 Agenda 1 2 3 4 IFRS timeline

More information

New Developments Summary

New Developments Summary April 15, 2008 NDS 2008-17 Revised for FASB Codification July 1, 2009 New Developments Summary Business combinations FASB Statement 141 (revised 2007) (ASC 805) Summary On December 4, 2007, the FASB issued

More information

A practical guide to share-based payments. February 2011

A practical guide to share-based payments. February 2011 A practical guide to share-based payments February 2011 Contents Page Introduction 2 Questions and answers 3 1. Scope of IFRS 2 6 2. Identifying share-based payments in a business combination or joint

More information

IFRS industry insights

IFRS industry insights IFRS Global Office April 2012 IFRS industry insights IASB issues revised exposure draft on revenue recognition insights for the insurance industry The revised ED is the next step in developing an entirely

More information

IFRS alert... IFRS alert 2008-01. IASB publishes new Standards on Business Combinations and Consolidated and Separate Financial Statements

IFRS alert... IFRS alert 2008-01. IASB publishes new Standards on Business Combinations and Consolidated and Separate Financial Statements IFRS alert... IASB publishes new Standards on Business Combinations and Consolidated and Separate Financial Statements Alerts may include Grant Thornton International s analysis of how IFRS should be applied

More information

IFRIC DRAFT INTERPRETATION D20

IFRIC DRAFT INTERPRETATION D20 IFRIC International Financial Reporting Interpretations Committee IFRIC DRAFT INTERPRETATION D20 Customer Loyalty Programmes Comments to be received by 6 November 2006 IFRIC Draft Interpretation D20 Customer

More information

Definitions of operating, investing and financing activities

Definitions of operating, investing and financing activities STAFF PAPER IFRS Interpretations Committee Meeting Project Paper topic IAS 7 Statement of Cash Flows 22 23 January 2013 IFRS IC March/July 2012 IASB January 2012 Definitions of operating, investing and

More information

International Financial Reporting Standard 4 Insurance Contracts. Objective. Scope IFRS 4

International Financial Reporting Standard 4 Insurance Contracts. Objective. Scope IFRS 4 International Financial Reporting Standard 4 Insurance Contracts Objective 1 The objective of this IFRS is to specify the financial reporting for insurance contracts by any entity that issues such contracts

More information

2. The transfer disclosures were published to enable users of financial statements:

2. The transfer disclosures were published to enable users of financial statements: STAFF PAPER IFRS Interpretations Committee Meeting January 2013 Project Paper topic Disclosures-Transfers of Financial Assets (Amendments to IFRS 7) Servicing agreements CONTACT(S) Barbara Davidson bdavidson@ifrs.org

More information

Business Combinations

Business Combinations HKFRS 3 (Revised) Revised July November 2014 Effective for annual periods beginning on or after 1 July 2009 Hong Kong Financial Reporting Standard 3 (Revised) Business Combinations COPYRIGHT Copyright

More information

CIMA Managerial Level Paper F2 FINANCIAL MANAGEMENT (REVISION SUMMARIES)

CIMA Managerial Level Paper F2 FINANCIAL MANAGEMENT (REVISION SUMMARIES) CIMA Managerial Level Paper F2 FINANCIAL MANAGEMENT (REVISION SUMMARIES) Chapter Title Page number 1 The regulatory framework 3 2 What is a group 9 3 Group accounts the statement of financial position

More information

Meeting. Project Paper topic. nts from. 1. This is the first. (a) (b) (c) plan. 3. The + +1 203 956 5305. +44 20 7246 6957 Joanna Yeoh

Meeting. Project Paper topic. nts from. 1. This is the first. (a) (b) (c) plan. 3. The + +1 203 956 5305. +44 20 7246 6957 Joanna Yeoh STAFF PAPER REG FASB IASB Meeting 19 March 21 March 2012 Project Insurance Contracts Paper topic Separation of Investment Componen nts from Insurance Contracts Background CONTACT( (S) Christopher Irwin

More information