X hits on this document

PDF document

Draft for discussion at ICAEW IISC meeting, 20th June 2005 - page 16 / 51





16 / 51

  • There is a rebuttable presumption that an insurer’s financial statements will become less relevant and reliable if it introduces an accounting policy that reflects future investment margins in the measurement of insurance contracts.

  • Where an insurer changes its accounting policies for insurance liabilities, it may reclassify some or all financial assets as ‘at fair value through profit and loss’.

  • An insurer need not account for an embedded derivative separately at fair value if the embedded derivative meets the definition of an insurance contract.

  • Unbundling of the deposit component of an insurance contract is required if the insurer can measure the deposit component (including any embedded surrender options) separately (i.e. without considering the insurance component) and its accounting policies do not otherwise require it to recognise all obligations and rights arising from the deposit component. Where only the first of these conditions is met the insurer is permitted to unbundle the deposit component.

  • ‘Shadow accounting’, which seeks to match the accounting treatments in accounting models where investment gains and losses have consequent effects on the measurement of some or all insurance liabilities (including the related deferred acquisition costs and intangible assets), is permitted. An insurer is permitted, but not required, to change its accounting policies so that a recognised but unrealised gain or loss on an asset affects those measurements in the same way that a realised gain or loss does. The related adjustment to the insurance liability shall be recognised in equity if, and only if, the unrealised gains or losses are recognised directly in equity.

  • Where insurance contracts have discretionary participation features these may, but need not, be recognised separately from the guaranteed element. If they are not recognised separately, the whole contract shall be treated as a liability. If they are recognised separately the guaranteed element shall be classified as a liability, but the discretionary element may be classified as either a liability or a separate component of equity (or split into liability and equity components). The IFRS does not specify how this determination is to be made. The discretionary feature may not be classified as an intermediate category that is neither liability nor equity.30 All premiums received may be recognised as revenue without separating any portion that relates to the equity component, although if part or all of the discretionary participation feature is classified in equity, a portion of profit or loss may be attributable to that feature (in the same way that a portion may be attributable to minority interests) as an allocation of profit or loss.

  • Where financial instruments have discretionary participation features the same rules apply, with additional requirements relating to the liability adequacy test and the impact of IAS39. Although these contracts are financial instruments, the issuer may continue to recognise the premiums for these contracts as revenue and recognise as an expense the resulting increase in the carrying amount of the liability.

  • Certain disclosures about insurance contracts are required, but not their fair value.

Among the most significant changes from ED5 in relation to life insurance, the standard (see para. BC227):


In the UK this applies to the FFA


Document info
Document views184
Page views184
Page last viewedWed Jan 18 06:26:39 UTC 2017