Insurance Contracts
The Board decided to develop an IFRS on insurance contracts because there was no IFRS on insurance contracts, and insurance contracts were excluded from the scope of other relevant IFRSs (eg IFRSs on provisions, financial instruments and intangible assets).
Furthermore, accounting practices for insurance contracts were diverse, and also often differed from practices in other sectors. The insurance project will address accounting by both insurers and policyholders.
The Board split the project into two phases:
- Phase I of this project resulted in IFRS 4 Insurance Contracts, an interim standard that permits a wide variety of accounting practices for insurance contracts. Many of these practices differ from those used in other sectors and make it difficult to understand insurers’ financial statements.
- In phase II, the current phase, the Board intends to develop a standard that will replace the interim standard and that will provide a basis for consistent accounting for insurance contracts on the longer term.
Is this project part of the Memorandum of Understanding?
In October 2008, the FASB decided to participate in this project, so this is now a joint project. However, the project is not part of the Memorandum of Understanding with the FASB (MoU).
Where are we now?
In November 2008, the Insurance Working Group had its tenth meeting. At this meeting the Working Group provided input for a number of issues that followed from the responses to the discussion paper, Board meetings and the previous working group meeting (April 2008). The Board expects to discuss the project next in December 2009.
In February 2008, the Board started its review of responses to the discussion paper. The Board has made no decisions in this project since publishing the discussion paper. For more information see Meeting Summaries and Observer Notes.
In May 2007, the Board published a discussion paper, Preliminary Views on Insurance Contracts. The discussion paper proposed that insurers should measure insurance contracts at their current exit value, estimated using three blocks:
- an estimate of future cash flows
- the effect of the time value of money
- a margin.
Next due process step
The Board aims to publish an Exposure Draft in late 2009 and a final standard in 2011.
Further information
Related projects
There are important interactions with other projects, particularly those on the conceptual framework, revenue recognition, fair value measurement, performance reporting, financial instruments and revisions to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, and a potential project on liabilities and equity.
The work on insurance contracts will proceed in parallel with these other projects as much as possible.