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SPECIAL ALERT - KEY INSURANCE ACCOUNTING DEVELOPMENTS
During April, the IASB continued its redeliberations on the June 2013 re-exposure draft of Insurance Contracts:
- Presenting insurance contract revenue - The IASB reaffirmed that insurance contract revenue should be presented in profit and loss, as proposed in the re-exposure draft, and that the determination of insurance contract revenue should be consistent with commonly understood notions of revenue. It appears that the IASB is sticking to the proposals in the re-exposure draft, with some wording clarifications.
- Project plan for non-targeted issues - The re-exposure draft was issued with requests for comments limited to a handful of specific issues, but a number of other key issues have been raised during stakeholder consultations and the IASB's redeliberation process. In the April IASB meetings, the following issues were agreed as the subjects of consideration at future meetings:
- Scope of fixed-fee service contracts
- Guidance on significant insurance risk
- Portfolio definition and unit of account
- Discount rate for long-term contracts and unobservable market data
- Asymmetrical treatment of reinsurance contracts
- Recognition of contracts acquired through portfolio transfer or business combination
- Allocation pattern for the contractual service margin
Many of these issues will be of interest to Canadian insurers - of particular interest to Canadian life insurers will the consideration of the discount rate for long-term contracts and unobservable market data.
The IASB continues to make important progress in resolving issues raised in the consultation process. There is more to come, including redeliberating the proposals on "mirroring" and the "non-targeted issues" summarized above. For more details, watch for the next edition of IFRS - Insurance Newsletter, which will be available for download by May 5. We will keep you posted.