FEE supports the IASB proposal (paragraphs 30-31) that the contractual service margin should be adjusted for differences between the current and the previous estimates of the present value of future cash flows that relate to future coverage and other future services as such treatment would contribute to more useful and relevant information provided to the users of financial statements. FEE also believes the contractual service margin should be adjusted for changes to the risk adjustment that relate to future services.
The scope of contracts that may qualify for mirroring may appear to be too narrow and there may be an arbitrary “bright line” between the treatment of this “mirroring” class of contracts and participating contracts with broadly similar features. This “bright line” will be further affected by the new category of embedded derivatives (closely related, but to be separated and with all changes presented in profit or loss) that is identified under the mirroring approach and might lead to new accounting mismatches.
FEE would welcome an alternative that proposes a single, consistent measurement approach for all insurance contracts that promise benefits which depend on asset returns or the surplus of a company as a whole.
FEE acknowledges that in proposing to present the effects of the changes in the discount rates in OCI the IASB has responded to certain preparers’ as well as users’ concerns about short term volatility being reflected in profit or loss. However, the mandatory use of OCI will create accounting mismatches where insurers’ assets are not held at fair value through OCI. In FEE´s opinion, accounting mismatches may easily be reduced by introducing an option on a portfolio level to recognise all changes in the insurance liability measurement in profit or loss. FEE therefore remains supportive of a non-mandatory use of OCI and the introduction of a policy choice on a portfolio basis on whether to use profit or loss or OCI to reflect changes in the discount rate.
Final comment letter to IASB
Final comment letter to EFRAG
EFRAG's draft comment letter to IASB
IASB-ED-Insurance Contracts
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article