Insurance Contracts with Cash Surrender Value – Accounting [Completed]
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Effective date: |
This Guideline applies to annual financial statements relating to fiscal years beginning on or after January 1, 2026. Earlier application is permitted |
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Last updated: |
September 2024 |
Overview
At its meeting on April 25, 2023, the AcSB approved a project to provide guidance on accounting for insurance contracts with cash surrender value in Part II and Part III of the CPA Canada Handbook – Accounting.
On November 3, 2023, the AcSB released for comment proposed Accounting Guideline AcG-21 Accounting for Life Insurance Contracts with Cash Surrender Value in Part II of the CPA Canada Handbook – Accounting. The new Guideline would also apply to not-for-profit organizations (NFPOs) using Part III of the Handbook, as relevant. The AcSB issued its exposure draft in November of 2023 and deliberated feedback from December 2023 to June 2024. The AcSB expects to issue a consultation paper in early 2025.
The proposed Guideline would address the accounting for life insurance contracts that contain a cash surrender component, from the policy owner’s point of view. The proposed Guideline includes guidance on recognition and measurement of cash surrender value of a life insurance policy, presentation of policy premiums and changes in cash surrender value, and disclosures.
The proposed Guideline:
- requires recognition of cash surrender value as an asset measured at the amount that would be immediately realized by the policy holder if the policy were terminated prior to the death of the insured;
- requires presentation of policy premiums and change in cash surrender value on a net basis, where a net debit is reported as expense and a net credit is reported as income; and
- establishes disclosure requirements, including disclosure of cash surrender value in aggregate for all life insurance policies with cash surrender value and the amounts of acquisitions and terminations of life insurance policies during the period.
At its June 2024 meeting, the AcSB completed its deliberations on feedback from interested and affected parties. This included considerations from its Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee. Following these deliberations, the AcSB approved the issuance of Accounting Guideline (AcG) 21, which addresses the accounting for life insurance contracts with cash surrender value, to be included in Part II of the Handbook, with only minor drafting changes .
For further details, refer to the project summary on the AcSB website.
Other developments
June 2024
At its June 2024 meeting, the AcSB completed its deliberations on feedback from interested and affected parties. This included considerations from its Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee. Following these deliberations, the AcSB approved the issuance of Accounting Guideline (AcG) 21, which addresses the accounting for life insurance contracts with cash surrender value, to be included in Part II of the Handbook, with only minor drafting changes remaining. The Board plans to issue the finalized AcG in September 2024.
November 2023
On November 3, 2023, the AcSB published for comment proposed Accounting Guideline AcG-21 Accounting for Life Insurance Contracts with Cash Surrender Value.