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Journal entry — Insurance project — FASB makes tentative decisions

Published on: Sep 17, 2015

At its meeting yesterday, the FASB tentatively decided that benefits that are related to certain nontraditional long-duration insurance contracts and include other-than-nominal capital market risks (e.g., guaranteed minimum income, guaranteed minimum withdrawal, guaranteed minimum accumulation, and guaranteed minimum death — also known as “GMxB features”) should be measured at fair value through net income in accordance with ASC 8151 and ASC 820.2 However, one Board member cautioned that although the FASB intends to limit this decision to GMxB features, users could interpret it as implying that other types of long-duration insurance contracts also have other-than-nominal capital market risks and thus should be accounted for at fair value through net income.

The Board also discussed the accounting for an entity’s own credit through other comprehensive income (OCI). Although the FASB did not make any decisions on this topic, the Board asked the staff to further analyze whether an entity’s own credit should be included in net income or OCI.

Further, the Board discussed the liability for future policy benefits for participating life insurance contracts. Several questions were raised regarding the mechanics of such contracts, including contracts written at a mutual insurance company, contracts within a closed book of business, and how frequently these contracts are issued by stock insurance companies. The Board asked the staff to further research the pros and cons of excluding participating life insurance contracts from the scope of the targeted improvements related to long-duration insurance contracts project, in particular those participating contracts that are considered to be in a closed block of business (i.e., that are issued by companies that have demutualized). 

The Board will continue to deliberate its project on long-duration insurance contracts at future meetings.


1 FASB Accounting Standards Codification Topic 815, Derivatives and Hedging.

2 FASB Accounting Standards Codification Topic 820, Fair Value Measurement.

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