The staff noted that the Board had previously decided that if a financial guarantee contract meets the definition of an insurance contract and was not incurred or retained on transferring financial assets or financial liabilities to another party, the contract is within the scope of the IFRS on insurance contracts. However, as decided by the Board in finalising IAS 39, the issuer should initially recognise it at fair value, and subsequently measure it at the higher of (i) the amount recognised under IAS 37 and (ii) the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with IAS 18. The issuer is subject to the derecognition provisions of IAS 39.

The staff requested the Board to consider whether this decision should be re-exposed and in the meantime the issue should revert to what was exposed in ED 5.

Some Board members expressed concern that such a change would equally be a change to what was exposed and considered in finalising the financial instrument standards.

It was agreed to revert to the proposal in ED 5 in finalising the Insurance Contract standard and to expose the issue as soon as possible as part of an Omnibus exposure draft arising from recently approved or soon to be approved standards.