Financial Services Ireland

To the Point: FASB’s proposed guidance

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To the Point: FASB’s proposed guidance

FASB scales back scope of insurance contracts project

The Financial Accounting Standards Board (FASB or Board) scaled back the scope of its insurance contracts  project in response to feedback from constituents that any benefits from applying the proposed guidance to all contracts that met a new definition of an insurance contract would not outweigh the cost of implementing it.

Of most concern were contracts written by noninsurance entities such as banks and commercial entities and non-life insurance contracts written by insurance companies. As a result, the Board decided to focus on improving recognition, measurement and disclosures for long-duration insurance contracts and improving disclosures for short-duration contracts.

The FASB also indicated that the project would no longer focus on converging US GAAP and IFRS. The FASB proposal was based on a new model it developed jointly with the International Accounting Standards Board (IASB), but the FASB and the IASB issued separate proposals after disagreeing on some key points. The IASB is moving ahead with its proposal.