This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

Deloitte comment letter on insurance contracts

  • U.S. Comment Letters Image

Oct 29, 2013

We have published our comment letter on FASB Proposed Accounting Standards Update (ASU), “Insurance Contracts.” We support the Board’s objectives of improving, simplifying, and enhancing the financial reporting requirements for insurance contracts and of increasing the comparability and decision-usefulness of information about such contracts, but believe some modifications can help advance these objectives.

These suggested modifications include:

  • The exceptions for warranties, financial guarantee contracts, and certain fixed-fee contracts should be further amended and clarified.
  • Entities using the building block approach should be required to unlock the margin each reporting period to reflect its revised assumptions about the ultimate expected profitability of an insurance contract portfolio.
  • Entities should not be compelled to recognize the effects of changes in expected cash flows attributable to changes in the discount rate in other comprehensive income.
  • Revenue for a portfolio of contracts accounted for under the premium allocation approach should not be recognized fully over the coverage period when the liability for incurred claims is measured without any provision for risk during the settlement period.

Further, we support the FASB and IASB in their convergence efforts, but understand the challenges on agreeing to a completely converged model. We also recommend that the Board conduct field testing and establish an implementation group before issuing a final ASU.

Click to access the full comment letter.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.