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IASB Meeting Summaries and Observer Notes

IASB Meeting Summaries and Observer Notes


 IASB December 2012


 

The IASB met on 14 December 2012 to continue its discussions of the proposed Insurance Contracts Standard. The IASB discussed unlocking the residual margin, the residual margin for participating contracts and impairment of reinsurance contracts. In addition, the IASB received an update on the FASB-only meetings held in November 2012.

Unlocking the residual margin

The IASB tentatively decided that the residual margin should be unlocked for differences between current and previous estimates of cash flows relating to future coverage or other future services.

All IASB members agreed with this decision.

The residual margin for participating contracts

The IASB tentatively decided that the residual margin for participating contracts should not be adjusted for changes in the value of the underlying items as measured using IFRS.

Eight IASB members agreed with this decision.

The IASB tentatively decided that the constraint on recognising revenue that is proposed in the Revenue Recognition project should not be applied to the allocation of the residual margin for insurance contracts, for both participating and non-participating contracts.

All IASB members agreed with this decision.

Impairment of reinsurance contracts

The IASB tentatively decided that a cedant should account for the risk of non-performance that is associated with changes in expected credit losses as follows

  1. At inception of the contract, the cedant determines the residual margin by reflecting in the expected fulfilment cash flows all the expected effects of non-performance, including those associated with expected credit losses.

    Fourteen IASB members agreed with this decision. One member was absent.

  2. After inception of the contract, the cedant shall recognise in profit or loss changes in cash flows that result from changes in expected credit losses.

    Thirteen IASB members agreed with this decision. One member was absent.

Accordingly, a cedant would not apply the proposals of the Impairment project that are being developed by the IASB to reinsurance contracts.

Next steps

The IASB will continue its joint discussions with the FASB on the Insurance Contracts project at their meeting in January 2013.
 

Date: 12/14/2012