Leases
At their October 2009 joint meeting, the boards tentatively decided to exclude from the scope of the proposed new leases requirements contracts that represent the purchase or sale of the underlying asset. At this meeting, the boards discussed the situation when a contract is the purchase or sale of the underlying asset.
The boards decided tentatively that:
- Contracts that transfer control of the
underlying asset should be excluded from
the scope of the proposed new leases
requirements
- The proposed new leases requirements
should provide indicators to help a
reporting entity determine whether control
has been transferred
- Management of the reporting entity
should exercise judgement and consider all
relevant facts and circumstances when
determining whether control of the
underlying asset has been transferred
- Situations in which control of the
underlying asset has normally been
transferred include
- Contracts where the title to the
underlying asset automatically transfers
- Contracts that include a bargain
purchase option
The boards instructed the staff to provide
additional analysis on the definition of
control, how control would be assessed, and
other possible indicators of control in the
context of a lease contract
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The boards discussed:
- whether to account for insurance, investment and service components included in an insurance contract as if those components were separate contracts (unbundling)
- presentation of the performance statement
- derivatives embedded within a host insurance contract
Unbundling
The boards discussed whether to account
for components of an insurance contract as
if those components were separate contracts
(ie unbundle those components). The IASB
decided tentatively that, for recognition
and measurement, an insurer should:
- unbundle a component of an insurance
contract if it is not interdependent with
other components of that contract.
- not unbundle a component that is
interdependent
The FASB decided tentatively that if
unbundling is not required for recognition
and measurement, it should not be a
permitted option. The FASB asked staff to
clarify further how unbundling for
recognition and measurement relates to (a)
the definition of an insurance contract and
the scope of the proposed standard, (b) the
presentation models for the performance
statement, and (c) bifurcation of embedded
derivatives.
Presentation of the statement of
comprehensive income
The boards discussed five models for the presentation of the statement of comprehensive income for insurance contracts and:
- tentatively rejected a model that
recognises revenue on the basis of written
premiums (rather than recognising revenue as
the insurer performs under the contract
- asked the staff to clarify further the
remaining models
Embedded derivatives
The boards discussed two approaches to measuring derivatives embedded in insurance contracts:
- Measure at fair value (using existing guidance on when to bifurcate)
- Measure consistently with the measurement used for the host insurance contract
Views diverged and no clear consensus
emerged. The boards will return to the topic
of embedded derivatives at a future meeting.
Next steps
The boards will continue their discussion of
this project at their joint meeting in
January.
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Future Board meetings
The Board will meet in public session on the following dates in 2010. Meetings take place in London, UK, unless otherwise noted.
- 18 - 22 January
- 15 - 19 February
- 2 February (PM)
- 10 February (PM)
- 15 - 19 March
- 22 - 24 March
- 19 - 23 April
- 17 - 21 May
- 14 - 18 June
- 19 - 23 July
- 13 - 17 September
- 18 - 22 October
- 25-27 October (Norwalk)
- 15 - 19 November
- 13 - 17 December
Please note that we are likely to add some meeting dates. We will include any such additional dates in future issues of IASB Update.
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There are no comment deadlines to be met before the January 2010 Board meeting. For a full list of comment deadlines, visit the Open to Comment section of the IASB website.
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