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Highlights from the FASB’s June 4 meeting

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Jun 06, 2014

At its June 4, 2014, meeting, the FASB discussed its projects on (1) disclosures about short-duration contracts issued by insurance entities and (2) classification and measurement of financial instruments.

Insurance — short-duration contracts

The FASB tentatively decided to require entities to disclose the following information about short-duration insurance contracts:

  • Incurred- and paid-loss development tables for the most recent 10 years (showing amounts net of reinsurance), at an appropriate level of disaggregation, that include a reconciliation to the liability for unpaid claims and claim adjustment expenses recognized in the statement of financial position. An entity also would need to disclose ceded reinsurance at the same level of disaggregation. The final ASU also would provide implementation guidance on this topic.
  • Disaggregated information about claim frequency, including information in the incurred-claims development table about liabilities that are incurred but not reported.
  • Information about claims duration, including the percentage payout of claims for each of the 10 most recent accident years.
  • The nature and amount of, and the reasons for, any material change in an existing liability for unpaid claims and claims adjustment expenses that is due to a change in estimation method, assumptions, or inputs.
  • For liabilities of unpaid claims and adjustment expenses that are discounted, the effects of the discounting, including the amount of interest recognized during the period and the financial statement line item(s) in which the interest accretion is classified.

In addition, the Board debated whether an entity should include health insurance contracts in the net incurred- and paid-loss development table since entities are currently not required to provide such disclosures under statutory reporting for these contracts (unlike those for property and casualty insurance contracts). The Board tentatively decided to require entities to include health insurance contracts, like all other short-duration contracts, in the development tables.

For more information, see the related Deloitte Accounting Journal entry and the meeting minutes on the FASB's Web site.

Classification and measurement of financial instruments

The FASB continued redeliberating its proposed Accounting Standards Update Recognition and Measurement of Financial Assets and Financial Liabilities and tentatively decided to:

  • Retain the current guidance on presentation of financial assets and financial liabilities in the statement of financial position; however, entities would be required to disclose, in the notes to the financial statements, “all financial assets and financial liabilities grouped by measurement category and form of financial assets.”
  • Require public business entities “to disclose the fair value of financial assets and financial liabilities that are measured at amortized cost, [e]ither (1) parenthetically on the face of the statement of financial position or (2) in the notes to the financial statements. This disclosure would not be required for receivables and payables due in less than a year and demand deposit liabilities. [E]ntities other than public business entities” are not required to provide this disclosure.
  • Keep “the current presentation requirements for financial assets measured at amortized cost that are subsequently identified for sale.”
  • Affirm “the current requirement that entities reporting their own debt instruments at fair value through net income should disclose the difference between the aggregate fair value and the aggregate unpaid principal balance of such outstanding debt instruments.” In addition, entities would not be required to “disclose the amortized cost of those instruments parenthetically on the face of the statement of financial position.”

For more information, see the meeting notes on the FASB’s Web site.

Correction list for hyphenation

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