Alternative views in the Exposure Draft

The IASB members who had indicated an intention to present an Alternative View in the forthcoming Insurance Contracts Exposure Draft outlined the likely reasons for their dissents.

John T Smith

Mr Smith would dissent for many of the reasons he dissented to the issue of IFRS 4 Insurance Contracts. In addition, he objects to the treatment of the risk adjustment, the treatment of renewal options, and the accounting for investment contracts with a discretionary participation feature issued by an insurance company. He summarised his reasons by saying that he does not think the package of decisions in the ED advanced financial reporting. He thought that IFRS users knew that IFRS 4 was imperfect; he did not want to convey the message that the ED was a better answer.

Jan Engstrom

Mr Engstrom noted that he was still assessing whether he would dissent.

He is concerned that the scope was too broad. He agreed that health, life and catastrophe (high severity, low risk) contracts should have 'insurance accounting'. However, he saw many general insurance contracts (fire, auto, etc) as being no different in substance to service contracts and to force them into the proposed insurance accounting model would not help the insurance companies or their investors.

He disagrees with the treatment of acquisition costs. He noted that other types of business incur substantial costs when securing a contract (he used a defence supply contract as an example). Payments to agents and other experts were expensed in the period incurred; he did not see these 'contract acquisition costs' as any different in substance to insurance contract acquisition costs and asked why they should get different accounting.

Finally, he is not convinced that he understands (and therefore can accept) the overall model to be proposed in the ED.

Patricia McConnell

Mrs McConnell had not yet confirmed her intention to dissent.

However, she was particularly concerned about the treatment of acquisition costs and issues of display and disclosure.

James Leisenring

Mr Leisenring noted that his dissent was moot, since the ED would not be balloted until after his term as a Board member expired. However, he would have dissented for a number of reasons.

Fundamentally, he believes that the approach to insurance accounting to be proposed in the ED is inconsistent with the IASB Framework in that it recognises things as assets and liabilities that demonstratively do not meet the definitions of assets and liabilities in the Framework.

He does not believe that the scope is operational, especially with respect to health care and investment contracts. He does not see the logic for not recording the cash surrender value of an insurance policy as a liability when it is, in substance, the same as the demand deposit floor, which is recorded as a liability.

He would also object to a number of the display issues highlighted by other Board members.