FASB and IASB Hold Discussions Regarding Insurance Contracts
The Financial Accounting Standards Board and the International Accounting Standards Board came together in London to discuss matters pertaining to Insurance Contracts related project further. Some of the points that were debated during their meeting included money’s value in terms of time in the superior allocation related approach as well as the presentation of alterations made to the liability for participating contracts. All the members of the FASB and the IASB came to an agreement that the rate of discount at the time of incepting the contract must be utilized for measuring liability for the rest of the coverage at the time of it being discounted or accredited.
Both FASB and IASB also held discussions with regard to how presenting alterating in the Other Comprehensive Income in the insurance related liability that arise as a result of changes made in the rate of discount could be applicable to the liability presentation for claims that have been incurred for insurance contracts.
Both the boards temporarily decided that when the incurred claims liability gets discounted, the insurer must utilize the rate that was applied at the time of incepting the contract for determining the claims amount as well as interest related expense in loss or profit.
As many as 6 of the Financial Accounting Standards Board members gave a nod to the decision, whereas eleven members of the International Accounting Standards Board stated that they were in favor of the rate that was applied on the date of incurring the claim. A total of thirteen International Accounting Standards Board members supported the rate applicable at the time of incepting the contract for convergence’s sake.
The board also gave a nod to the previous decisions that were taken on a tentative basis that were applicable on contracts that consisted of participation aspects for which mirror approach will be applicable. They mentioned that the decisions related to mirroring would rank higher than the decisions taken on tentative basis that the insurers must present in the Other Comprehensive Income changes in the liability of the insurance contract.
The FASB and the IASB will continue their discussions on these matters unless they arrive at decisions that is acceptable to all the members.