On 20 June 2013, the International Accounting Standards Board (“IASB”) published, for public comment, a revised exposure draft of its proposals for accounting for insurance contracts (the “Proposals”). The Proposals reflect feedback received during the previous consultation process.
The objective of the Proposals is to provide a more consistent basis for the accounting for insurance contracts in order to assist users of financial statements to understand how insurance contracts affect an entity’s financial position, financial performance and cash flows. The Proposals will enhance comparability across entities, jurisdictions and capital markets and will apply to all insurance contracts whether issued by insurers or other entities.
Key provisions of the Proposals include changes to the ways in which (a) future profits are estimated and (b) the presentation of revenue and expenses are captured in financial statements. In the Proposals, the measurement of the insurance contract liability is based on the building blocks of discounted, probability-weighted cash flows, a risk adjustment and a contractual service margin representing the unearned profit on the contract.
Comments on the Proposals are invited from interested parties before 25 October 2013.
Please click here to view the Proposals.