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The LIAJ’s Comments on the IASB Exposure Draft Insurance Contracts

25 October, 2013

The Life Insurance Association of Japan, LIAJ (Chairman: Yoshio Sato, President of Sumitomo Life Insurance Co.) submitted its comments on the IASB Exposure Draft Insurance Contracts (hereinafter referred to as ‘Revised ED’, which provides revised proposals responding to comments received on the 2010 Exposure Draft, published in July 2010) on 25 October 2013.

IASB began a project on insurance contracts in 1997 to develop international standards on accounting for insurance contracts, and published an Exposure Draft for Insurance Contracts in July 2010 (hereinafter referred to as ‘2010 ED’). Based on the responses to 2010 ED received from the stakeholders, IASB has made several changes to the proposals, and published Revised ED for public comment in June 2013.

In its comments submitted to the IASB on 2010 ED, LIAJ had raised serious concern that presenting changes in insurance liabilities assessed at a certain point of time in profit or loss would not reflect the nature of the life insurance business. In this regard, LIAJ appreciates the IASB’s efforts to address those concerns in Revised ED, which includes several proposals such as recognizing the changes arose from the changes in discount rate in other comprehensive income (OCI), and recognizing changes in estimates of future cash flows by adjusting the contractual service margin.

On the other hand, LIAJ believes that Revised ED needs further improvements on the following points, and therefore, submitted its comments on Revised ED.

  • Appropriateness of scope of unlocking the contractual service margin
  • Complexity in the measurement by decomposing specific cash flows
  • Understandability of the statement of profit or loss and other comprehensive income
  • Impracticability, comparability and verifiability of the transition
  • Faithful presentation of life insurers’ financial position regarding the changes in insurance liabilities

For more details on the LIAJ’s comments, please refer to the PDF file below.

The LIAJ’s Comments on the ED Insurance ContractsPDF