Participating features in insurance contracts
The boards discussed the treatment of participating features in insurance contracts.
The IASB tentatively decided that payments arising from the participating feature should be included in the measurement of insurance contracts in the same way as any other contractual cash flows (ie on an expected present value basis).
The FASB decided tentatively that the insurer should recognise a liability for participating benefits to the extent that it has a legal or constructive obligation to pay those benefits.
The boards discussed possible disclosure requirements for participating contracts. Board members provided comments for the staff to consider in developing these requirements for further discussion.
The boards discussed disclosure requirements for insurance contracts. The staff proposed that the forthcoming exposure draft on insurance contracts should require an insurer to disclose information that:
- explains the characteristics of its insurance contracts;
- identifies and explains the amounts in its financial statements arising from insurance contracts; and
- helps users of its financial statements to evaluate the nature and extent of risks arising from insurance contracts.
The boards asked staff to clarify these disclosure objectives, considering:
- their relevance to providing information about amount, timing and uncertainty of future cash flows;
- the disclosure objectives developed in other projects; and
- the appropriate level of disaggregation for disclosures.
The boards reviewed proposed minimum disclosure requirements that would supplement the disclosure objectives. Board members provided comments for the staff to consider in developing these requirements for further discussion.
The boards will continue their discussion of this project in April.