Insurance Accounting Newsletter — Issue 19, March 2011
The joint meetings between the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have continued with great intensity since our previous newsletter.
The progress of the joint project on insurance accounting has hit the first stumbling block as the Boards disagreed on how to account for distribution costs incurred to add new business to insurance portfolios.
The contentious issue relates to the cost associated with unsuccessful efforts to sell an insurance policy. IASB believes that the associated costs are still part of the costs of the portfolio with no accounting loss at the point of sale if the insurer is able to assemble a portfolio that is capable of absorbing all the distribution costs. On the contrary, FASB believes that costs that did not result in a successful sale should be taken as an expense immediately with the portfolio carrying a larger deferred profit for release in later years.