In brief: FASB Chairman provides status update on insurance contracts project (No. 2012-14)
In brief
At the June 5 meeting of the Financial Accounting Standards Advisory Council (FASAC), as clarified at a subsequent FASB education session, FASB Chairman Leslie Seidman provided an update on the status of the insurance contracts project. She indicated that based on the nature and totality of differences between the FASB's and IASB's (the boards') views, it is not likely that the two boards will achieve convergence on this project. She further noted that the FASB and IASB have very different perspectives on the project, given that the US has existing guidance on insurance contracts whereas there is currently no comprehensive IFRS insurance standard. Read this In brief article for further information on the future direction of the insurance contracts project.
What's new?
At the June 5 meeting of the Financial Accounting Standards Advisory Council (FASAC), as clarified at a subsequent FASB education session, FASB Chairman Leslie Seidman provided an update on the status of the insurance contracts project. She indicated that based on the nature and totality of differences between the FASB's and IASB's (the boards') views, it is not likely that the two boards will achieve convergence on this project. She further noted that the FASB and IASB have very different perspectives on the project, given that the US has existing guidance on insurance contracts whereas there is currently no comprehensive IFRS insurance standard.
The FASB Chairman acknowledged that despite a strong desire to reach convergence and several attempts to resolve key differences, the boards could not reach agreement on fundamental aspects of the proposal. Those aspects include whether to include a risk adjustment in addition to the present value of expected cash flows estimate, the timing and classification of changes in assumptions (the unlocking of margin issue), and the treatment of acquisition costs relating to unsuccessful efforts.
What's next?
The FASB Chairman stated that given it is unlikely the two boards will have converged standards, and given that the FASB has existing standards to start from, the FASB is planning to take a step back to rethink the method under which they might incorporate their decisions into a final product. For example, the FASB will explore whether it should make targeted improvements (through amendments) to existing US GAAP, rather than issuing an entirely new insurance standard.
The FASB Chairman noted that they still plan to work through remaining open topics on the project with the IASB in the upcoming months, which include determining an approach for measuring earned premiums and transition. Although the FASB's technical plan currently targets issuance of an exposure draft by the end of 2012, given the FASB Chairman's comments, this plan may change.
Questions?
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact the Insurance team in the National Professional Services Group (1-973-236-7803).
Authored by:
Mary Saslow
Managing Director
Phone: 1-860-241-7013
Email: mary.saslow@us.pwc.com
Jennifer Englert
Senior Manager
Phone: 1-973-236-4099
Email: jennifer.m.englert@us.pwc.com
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