SUMMARY OF BOARD DECISIONS
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
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
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:
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
- 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).)
- An entity should account for a promised good or service as a separate
performance obligation if:
- 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,
- The good or service has a distinct function.
- A good or service has a distinct function if either:
- The entity regularly sells the good or service separately, or
- The customer can use the good or service either on its own or together
with resources that are readily available to the customer.
Unbundling an Investment Component
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
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.