International standard setters examine insurance

INSURANCE CONTRACTS were up for debate at the International Accounting Standards Board this week.

The focus was on goods, services and investment components, with the board discussing whether these should be unbundled from insurance contracts.

The starting point for discussions was the revenue recognition project, which stipulates that separate performance obligations should be identified.

On this basis, an entity should only account for a bundle of goods or services as a single performance obligation if it is provided to the customer as a unified offering, i.e. transferred in the same way, with the same function and not sold separately.

The IASB board “tentatively” concluded that insurers should unbundle explicit account balances when they are credited with an explicit return that is based on the account balance.

The organisation suggested that the unbundling should be carried out using the criteria being developed in the revenue recognition project, and said implicit account balances would not need unbundling.

Further discussions on the project will take place at a joint meeting on 11 May.

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Fiona Westwood of Smith and Williamson.