Last week, it was reported by PWC and other sources that FASB Chairman Leslie Seidman had “indicated that based on the nature and totality of differences between the FASB’s and IASB’s (the boards’) views, it is not likely that the two boards will achieve convergence on this [insurance contracts] project.” The full text of the PWC item is available here.
As envisioned as recently as two weeks ago, the FASB and IASB plan to converge the two standards’ insurance contract accounting was expected to radically change the way insurance companies presented their financial results. In a blog post last year, I noted that “investors with whom I have spoken believe the proposed changes would result in lower book values and more volatility in earnings and book values for insurance companies.”
Keeping in mind that the presentation of financial data is intended to help the users of the information (investors) better understand a company and its future prospects, I believe we all should applaud FASB’s decision to step back from the potentially problematic changes that were being considered. I believe we also should express appreciation for the input provided to FASB and IASB on the proposals over the past several years by representatives of the insurance-sector investment community, individual insurance companies and industry groups.
Last week’s reports also indicated that FASB now expects to begin exploring potential refinements to U.S. GAAP accounting for insurance contracts. We can all look forward to opportunities to support FASB in those efforts.