In November 2013, the American Institute of CPAs’ (AICPA) Financial Reporting Executive Committee (FinREC) and the Insurance Expert Panel submitted comment letters on the Financial Accounting Standards Board (FASB) Exposure Draft: Insurance Contracts (FASB ED) and the International Accounting Standards Board (IASB) Exposure Draft: Insurance Contracts (IASB ED). Additional input into the comment letters was received from members of the AICPA Depository Institutions Expert Panel, Employee Benefit Plans Expert Panel and Health Care Expert Panel.
The June 2013 exposure drafts are the next step in this joint project, which has also included a September 2010 FASB Discussion Paper: Preliminary Views on Insurance Contracts, and a July 2010 IASB Exposure Draft: Insurance Contracts.
FinREC continues to support the efforts of both the FASB and the IASB to either converge or more closely align U.S. generally accepted accounting principles (U.S. GAAP) with the International Financial Reporting Standards (IFRS), but believes high quality accounting standards should not be sacrificed for the sake of convergence. In the letter, FinREC noted that GAAP comprehensively addresses accounting for insurance contracts by insurance entities, whereas IFRSs do not have comprehensive insurance guidance.
If the FASB decides that changes are necessary to U.S. GAAP beyond targeted improvements, then FinREC said it believes the following are key areas on which the FASB and the IASB should seek convergence:
• Unlocking the Margin
• Fulfillment Cash Flows
• Definition of Portfolio
• Acquisition Costs
The comment letters can be found on the AICPA website, and a complete history of the Insurance Contracts Project can be found on the FASB website.