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.

May 4, 2011 FASB/IASB Joint Videoconference Board Meeting

Insurance contracts. The IASB and the FASB continued their discussions on insurance contracts by considering the unbundling of noninsurance goods and services and investment components.

Unbundling Noninsurance Goods and Services

The Boards discussed whether noninsurance goods and services should be unbundled from an insurance contract in accordance with the principles for identifying separate performance obligations in the revenue recognition project, that is:

  1. An entity should account for a bundle of promised good or services as one performance obligation if the entity integrates those goods or services into a single item that the entity provides to the customer. (If this criterion is satisfied, the entity need not consider the criteria in (2).)
  2. An entity should account for a promised good or service as a separate performance obligation if:
    1. The pattern of transfer of the good or service is different from the pattern of transfer of other promised goods or services in the contract, and
    2. The good or service has a distinct function.
  3. A good or service has a distinct function if either:

    1. The entity regularly sells the good or service separately, or
    2. The customer can use the good or service either on its own or together with resources that are readily available to the customer.
The Boards indicated their intention to be consistent with the approach in the revenue recognition project, subject to consideration of whether the pattern of transfer criterion is needed in this context and to future decisions on allocation. The Boards will consult the Insurance Working Group on the practicality of implementing the approach being developed.

Unbundling an Investment Component

The Boards tentatively decided that an insurer should unbundle explicit account balances that are credited with an explicit return that is based on the account balance.

The Boards indicated that such an explicit account balance should be separated from an insurance contract using criteria based on those being developed in the revenue recognition project for identifying separate performance obligations. An insurer would not unbundle implicit account balances.

The Boards will consider further whether an explicit account balance exists only when the policyholder can withdraw the account balance without the loss of insurance coverage.

In addition, the IASB decided that an insurer should account for an unbundled explicit account balance in accordance with the relevant requirements for financial instruments in IFRSs, subject to future decisions on allocation. The FASB did not vote on this issue. The Boards requested the staff to consider how the decisions would apply to typical types of insurance contracts with account balances.