Tentative Board Decisions
Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.
June 4, 2014 FASB Board MeetingInsurance—Disclosures about Short-Duration Contracts. The Board discussed which potential disclosures about short-duration contracts should be required.
The Board decided to require all insurance entities that issue short-duration contracts to disclose the following information, aggregated or disaggregated so that useful information is not obscured by either the inclusion of a large amount of insignificant detail or the aggregation of items that have different characteristics, in annual financial statements:
Incurred and paid claims development tables
- Information about incurred claims and claim adjustment expenses and paid claims and claim adjustment expenses, on a net basis after risk mitigation (that is, through reinsurance), by comparing the most recent 10 years in which claims were first reported (claims development)
- Reconciliation of the net amount of cumulative incurred and paid claims to the aggregate carrying amount of the liability for unpaid claims and claim adjustment expenses recognized in the statement of financial position, with separate disclosure of ceded reinsurance that is disaggregated in the same way that a reporting entity disaggregates its disclosure of claims development.
- Information about the number of reported claims that affect incurred claims and allocated claim adjustment expenses
- Information about the amount of incurred but not reported liabilities included in the claims development tables.
- For liabilities of unpaid claims and claim adjustment expenses that are presented at present value in the financial statements, the effects of discounting on the financial statements, including the aggregate amount of discount deducted from the liability for unpaid claims and claim adjustment expenses, the amount of interest recognized during the period, and the line item(s) in which the interest accretion is classified
- Based on the information in the paid claims development tables, the percentage payout of claims for each of the most recent 10 accident years.
The Board decided that the requirement to disclose information about the liability for unpaid claims and claim adjustment expenses in paragraph 944-40-50-3 should be required for interim periods as well as for annual reporting periods.
Transition and Effective Date
The Board made the following decisions with regard to transition:
- Upon initial application of these disclosure requirements, an insurance entity would provide comparative disclosures for each prior period presented, except for the disclosure of incurred and paid claims development tables and the disclosure of the details about material changes in judgments made in calculating the liability for unpaid claims and claim adjustment expenses, which should be applied prospectively.
- An insurance entity would not be required to disclose information about claims development that occurred earlier than five years before the end of the first financial reporting year in which the guidance is first applied.
- An insurance entity would not be required to apply the transition disclosure guidance in Subtopic 250-10 on accounting changes and error corrections.
The Board directed the staff to draft the disclosure requirements to reflect the Board’s tentative decisions and to perform additional outreach about auditing considerations for disclosures of incurred and paid claims development tables and considerations about the costs and benefits of disclosures about claims development and claims frequency for health insurance entities. The Board will evaluate its disclosure decisions and the need to issue a revised proposed Update in light of that feedback.
Accounting for Financial Instruments: Classification and Measurement. The Board continued redeliberating the February 2013 proposed Accounting Standards Update, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, specifically discussing the presentation and disclosure of financial instruments.
Presentation of Financial Instruments in the Statement of Financial Position
The Board decided not to change how entities present financial assets and financial liabilities in the statement of financial position; however, the Board decided to require that entities disclose in the notes all financial assets and financial liabilities grouped by measurement category and form of financial assets.
Parenthetical Presentation of Fair Value for Financial Instruments Not Reported at Fair Value
The Board decided that public business entities would be required to disclose the fair value of financial assets and financial liabilities that are measured at amortized cost in accordance with Topic 820, Fair Value Measurement, either (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. The Board decided that entities other than public business entities would not be required to provide this disclosure.
Presentation of Financial Assets Carried at Amortized Cost That Are Subsequently Identified for Sale
The Board decided not to change the current presentation requirements for financial assets measured at amortized cost that are subsequently identified for sale.
Parenthetical Presentation of Amortized Cost for an Entity’s Own Outstanding Debt Instruments Measured at Fair Value through Net Income
The Board affirmed 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. The Board decided not to require entities to disclose the amortized cost of those instruments parenthetically on the face of the statement of financial position.
The Board will continue to discuss presentation and disclosure of financial instruments, including the matters not discussed at today’s meeting.