The European CFO Forum, which represents 21 of Europe’s largest insurance companies, has presented alternative proposals for participating contracts to the IASB.
The Forum believes that the IASB’s 2013 exposure draft and current redeliberations do not provide an appropriate basis to explain the performance of an insurance business to investors or adequately reflect the nature of long-term insurance contracts, particularly participating contracts.
“We believe the Board needs to clearly define an overall principle for accounting for contracts with participating features, and would support a measurement and presentation approach that is more aligned with the principles of the building-block model and with the new revenue recognition standard.”
The proposals were presented at an education session and, although the Board asked the representatives from the Forum a number of questions about the alternative proposals, no decisions were taken and no direction was given to the IASB staff.
The IASB is expected to make decisions on accounting for contracts with participating features as a whole in a future meeting.
The alternative proposals include the following key principles, which the Forum believes are interconnected and should be considered together as an integrated package.
|Full unlocking of the contractual service margin (CSM)||
|Release of the CSM||
|Presentation of interest expense in profit or loss||
|Single measurement basis||
|Non-mandatory use of OCI||
More detail (PDF 626 KB) on the Forum’s alternative proposals is available on the IASB’s website.
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