Paper on the use of OCI for the presentation of unearned profits

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  • ASAF (Accounting Standards Advisory Forum) (mid blue) Image

26 Feb, 2015

For the upcoming meeting of the Accounting Standards Advisory Forum (ASAF), which is to be held at the IASB's offices in London on 26-27 March 2015, the Accounting Standards Board of Japan (ASBJ) has submitted a paper 'Insurance Contracts: Use of OCI for Presentation of Unearned Profits'. In the paper, the ASBJ proposes that the contractual service margin (CSM) could be presented as accumulated other comprehensive income (AOCI) as opposed to being presented in the liability section of the statement of financial position.

The ASBJ stresses that it very much appreciates the IASB's long-term efforts in developing an accounting standard for insurance contracts. Yet the ASBJ believes that there are still controversies that reflect technical aspects as well as significant impact on insurers' financial reporting. Among these, the ASBJ has come to believe that the presentation of the CSM warrants further consideration.

The proposal to presented the CSM as AOCI  aims at promoting consistency between the presentation requirement of the CSM and the definition of a liability under the Conceptual Framework. The ASBJ also believes that this AOCI presentation could be applied irrespective of whether insurance contracts contain non-participating or participating features as the CSM would not significantly differ between participating contracts and non-participating contracts.

The paper was prepared by the ASBJ to stimulate discussions at the next ASAF meeting as well as globally. It's overall aim is to contribute to the IASB's ongoing deliberations and thus to support the Board in developing an insurance contract accounting standard that will be accepted globally.

Please click to access the paper on the ASBJ's website.

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