(IASB education session)
The IASB held an education session on 18 February 2013 in preparation for its decision on whether to proceed to ballot the revised Exposure Draft Insurance Contracts.The IASB was presented with an overview of the proposed model for accounting for insurance contracts. In addition, the IASB considered the ways in which it had addressed the comments of respondents on the 2010 Exposure Draft Insurance Contracts.
No decisions were made.
(IASB decision-making session)
The IASB met on 19 February 2013 to complete its planned technical discussions of the proposed model for accounting for insurance contracts. The IASB discussed the transition requirements for contracts acquired through a business combination and reviewed the due process necessary before beginning the balloting process. The IASB staff requested permission to begin the balloting process for the revised Exposure Draft.
Transition requirements for contracts acquired through a business combination
The IASB tentatively decided that:
- in applying the transition requirements for insurance contracts, an insurer should account for the in-force contracts that were previously acquired through a business combination using:
- the date of the business combination as the date of inception of those contracts; and
- the fair value of those contracts at the date of the business combination as the premium received.
- when an insurer first applies the forthcoming Insurance Contracts Standard to insurance contracts that were previously acquired through a business combination, any gains or losses should adjust retained earnings (rather than goodwill).
Permission to ballot a revised Exposure Draft for insurance contracts
In September 2012, the IASB agreed to publish a revised Exposure Draft of the proposals on accounting for insurance contracts but to seek feedback only on the following issues:
- treatment of participating contracts;
- presentation of premiums and claims in the statement of comprehensive income;
- treatment of the unearned profit in an insurance contract;
- presenting, in other comprehensive income, the effect of changes in the discount rate used to measure the insurance contract liability; and
- the approach to transition.
At its meeting in September 2012, the IASB noted that, while the revised Exposure Draft would include the full text of the proposed Standard, it would also be necessary to clearly inform stakeholders that the IASB does not intend to revisit aspects of the proposed Standard other than the areas it has targeted for re-exposure.
At this meeting, the IASB concluded that it had met the due process requirements to begin the balloting process. The IASB also noted that it has undertaken extensive outreach and comprehensively addressed the comments from respondents to the 2010 Exposure Draft Insurance Contracts. The IASB intends to undertake fieldwork with preparers and users of financial statements during the comment period to assess the costs and benefits of the targeted proposals. Accordingly, the IASB gave permission to begin the process of balloting the revised Exposure Draft.
All IASB members agreed. One member noted his intention to dissent from the publication of the revised Exposure Draft.
The IASB tentatively decided that the revised Exposure Draft should be open for comments for 120 days.
All IASB members agreed.
The IASB will proceed with the balloting process and plans to publish the revised Exposure Draft for comment in Q2 2013.