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Insurance Contracts 

Forging ahead

 

In 2010, the IASB issued an Exposure Draft (ED) to introduce the first comprehensive IFRS accounting model for insurance contracts that will replace the interim guidance contained in IFRS 4, Insurance Contracts. The ED proposed a comprehensive measurement model for all types of insurance contracts with a modified approach for some short-term contracts. The proposed measurement model was based on a “fulfillment” objective which reflects the fact that an entity generally expects to fulfill its liabilities over time by paying benefits and claims to policy holders as they become due, rather than transferring the liabilities to a third party.

Key tentative decisions arising from re-deliberations of the ED

 

  • The use of comprehensive income for recording some aspects of insurance liability re-measurement.
  • A confirmation of a previous decision to require a separate explicit risk margin in insurance liabilities.
  • A revision of transition proposals requiring retrospective application with a practical expediant when impracticable and an agreement that an insurer should recognize acquisition costs as part of the insurance liability in the pre-coverage period.
  • A decision that an insurer should accrete interest on the residual margin at a locked-in discount rate.

 

Still pending

 

In September 2012, the IASB announced its intention to issue a limited re-exposure draft of the proposed new insurance contracts accounting standard in the first half of 2013. The new standard is expected to be released in the first half of 2014.

 

Please contact your KPMG Accounting Advisory Services adviser for more information.

Todd M. Buchanan

Todd M. Buchanan

Partner, National Leader of Accounting Advisory Services

416-777-8847

Contact by e-mail

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