Summary of Board decisions are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue an Accounting Standards Update.

February 13, 2013 FASB Board Meeting

Insurance contracts. The FASB continued its discussions of the proposed insurance contracts standard. The Board discussed (1) reconsideration of the measurement of investment components and the aggregate insurance contracts revenue, (2) transition, (3) effective date and comparative financial statements, (4) early adoption, and (5) comment period.

Reconsideration of the Measurement of Investment Components and the Aggregate Insurance Contracts Revenue

The Board decided the following:
  1. The amount of consideration allocated to investment components and excluded from the premium presented in the statement of comprehensive income should be equal to the cash flows the insurer estimates it will be obligated to pay to policyholders or their beneficiaries regardless of whether an insured event occurs.
  2. At each reporting date these cash flows should be re-estimated based on current assumptions utilized in the measurement of the insurance contract liability, with any effect on insurance contract revenue allocated prospectively to periods in proportion to the value of coverage (and any other services) that the insurer estimates will be provided in those periods.

The Board decided the following:
  1. When determining the margin at contract inception, insurers can measure the insurance contract liability and the margin using the insurers’ determination of the portfolio immediately prior to transition.
  2. Contracts written or substantially modified subsequent to the transition date should be grouped into portfolios in accordance with the proposed guidance, which if different from (1)  may require separate portfolios.
Effective Date and Comparative Financial Statements

The Board decided the following:
  1. Not to include in the Exposure Draft, Insurance Contracts Update, a minimum time period between the issuance of the proposed guidance and the effective date, but rather to ask a question regarding key drivers impacting timing of implementation.
  2. The effective date for nonpublic entities will be a minimum of one year after the effective date for public entities.
  3. Insurers would be required to restate all comparative periods presented.
Early Adoption

The Board decided that insurers would not be allowed to early adopt the proposed guidance.

Comment Period

The Board decided to provide a 120-day comment period for the upcoming Exposure Draft, Insurance Contracts Update.

Next Steps

The Board will continue its discussions at its meeting on February 20, 2013.

Liquidation basis of accounting. The Board discussed the following issues and made the decisions as noted below.


The Board decided that the standard will apply to all entities except investment companies regulated under the SEC’s Investment Company Act of 1940.

The Board also affirmed its previous decision that there is no need for differential requirements for nonpublic companies.

Recognition and Measurement

The Board decided that the standard will provide specific recognition and measurement guidance only for an entity’s assets and the accruals of expected future income and expenses. An entity should recognize and measure its liabilities under the requirements of otherwise applicable U.S. GAAP. In applying those requirements, the entity might adjust the balance of a liability to reflect changes in the entity’s assumptions about the timing and amount of repayments of the liability; however, the entity should not anticipate legal release.

The Board also confirmed the staff’s understanding of how an entity should apply its previous decisions on recognition and measurement to items that the entity had not previously recognized as assets but which the entity plans to sell in liquidation. The Board discussed that an entity should recognize those items in the statement of net assets in liquidation separately from the accrual of expected income and expenses and that the entity should not deduct estimated disposal costs from the cash it expects to receive in exchange for those items.


The Board discussed the requirements in the proposed standard about presentation in the period of adoption. The Board decided not to change those requirements; however, the Board clarified that the standard will not require an entity to present information about any of its activities that preceded the date when liquidation became imminent.

The Board decided to clarify that, in addition to disclosures specifically required under the standard, an entity should provide other disclosures required by U.S. GAAP if those disclosures remain relevant to understanding the entity during its liquidation.

Transition and Other Matters

The Board affirmed the requirements in the proposed standard that an entity should apply the liquidation basis of accounting from the date when liquidation became imminent. Additionally, the first statement of changes in net assets should present only changes in net assets that occurred during the period since liquidation became imminent.

The Board decided that an entity already applying the liquidation basis of accounting as of the effective date of the standard will be required to apply a cumulative-effect adjustment to adjust for any changes needed to comply with the standard.

The Board decided that the standard will be effective for entities that enter liquidation during reporting periods beginning after December 15, 2013. Early adoption will be permitted.

The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.

Disclosure framework. The Board discussed a summary of the comments received on the Invitation to Comment, Disclosure Framework. The Board considered possible next steps in the project but did not make any decisions. The summary will be published on the Disclosure Framework project page of the FASB website.