The FASB has issued a discussion paper seeking comments on its preliminary views on accounting for insurance contracts that would fundamentally change the accounting by insurers and other entities that issue contracts with insurance risk. The discussion paper is an outgrowth of the IASB and FASB’s joint efforts to develop a single converged insurance standard. The FASB's release of the discussion paper follows the IASB's late-July issuance of an exposure draft containing its proposals on the same topic. Both documents address recognition, measurement, presentation, and disclosure for insurance contracts. The discussion paper compares the IASB's proposal to the FASB's preliminary views to date and to current US GAAP. The FASB is asking constituents to consider whether the FASB should ultimately adopt some version of the IASB's proposal or whether targeted changes to existing US GAAP would be sufficient. There is greater urgency for the IASB to adopt some version of its exposure draft as a final standard since comprehensive guidance on insurance accounting does not currently exist under IFRS; a final IASB standard is expected in mid-2011. Given the potential impact of the changes being considered, management should consider assessing the implications of the possible changes on existing contracts and its current business practices and commenting on both documents. The comment letter period on the FASB discussion paper ends on December 15, 2010 (or November 30, 2010 for roundtable participants). The comment period for the IASB's exposure draft ends on November 30, 2010. This Dataline discusses both documents and offers the firm's insights on the proposals.
* The “Addendum - Project status update” in paragraph .64 of this Dataline was added on February 16, 2011 to briefly summarize the Board activities that have taken place since the FASB discussion paper was issued and the expected timetable for completion of the IASB and FASB projects.