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.
November 24, 2009 Board Meeting
Insurance
contracts. The Board continued deliberating the joint project on
accounting for insurance contracts by discussing the recognition of an insurance
contract and the derecognition of insurance liabilities.
The Board
tentatively decided that an entity should recognize an insurance obligation at
the earlier of (1) the entity being on risk to provide coverage to the
policyholder for insured events and (2) the signing of the insurance contract.
The Board discussed embedded options in an insurance contract for
purchases of items ranging from additional insurance coverage(s) to goods or
services unrelated to insurance. The Board was not asked to reach a decision on
this topic and will discuss this topic at a future Board meeting.
The
Board tentatively decided on a principle that an insurance liability should be
derecognized by an entity when that obligation no longer qualifies as a
liability. The liability is eliminated when the entity is no longer on risk and
no longer required to transfer any economic resources for that
obligation.
Accounting
for financial instruments. The Board discussed the definition of
core deposits for use in its project on accounting for financial
instruments. The Board decided that the definition will include deposits that do
not have a contractual maturity that management believes are a stable source of
funds.
The Board decided to measure core deposits using the financial
instrument with a core deposit intangible asset approach agreed to at a previous
meeting. The following summarizes the remeasurement approach agreed to by the
Board:
- The value of the core deposit liability would be determined using a
present value of the average core deposit amount discounted by the difference
between the alternative funds rate and the all-in-cost-to-service rate over
the implied maturity.
- The core deposit liability amount that would be subject to the
remeasurement would be determined as an average amount over the implied
maturity time period, which would result in the consideration of future
deposits. Considering and valuing future deposits would result in an
intangible asset being reflected in the valuation.
The Board agreed
that core deposits would qualify for remeasurement changes to be recognized in
other comprehensive income. The balance sheet presentation of core deposits
would be subject to previous presentation decisions.