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24 Jul. 2015

Accounting Standards Advisory Forum (ASAF) July 2015

The July meeting of the Accounting Standards Advisory Forum (ASAF) saw the Forum’s membership meeting for the first time meet since the revised Forum’s membership was announced last month.

The Australian Accounting Standards Board (AASB) retained membership of the Accounting Standards Advisory Forum (ASAF), the prestigious advisory group to the International Accounting Standards Board (IASB), despite the membership shakeup.  The AASB will be working with the New Zealand Accounting Standards Board (NZASB).

The ASAF comprises of twelve expert members each representing National Standard Setters or regional bodies, with geographic restrictions on membership.  The AASB is one of just four Asia-Oceania representatives.  Whilst the Asia-Oceania members of the AASB, Asian-Oceanian Standard Setters Group (AOSSG) and national standard setters of China and Japan have not changed, the European members have changed significantly.

The Forum discussed a range of key issues relevant to all regions including Insurance, Present valuing, Conceptual framework, Provisions and Contingencies, Dynamic Risk management, disclosure Initiative, Pollutant Pricing Mechanisms and Rate Regulation. The AASB will be highlighting the progression of some of these topics over the next few weeks.

At the Forum, Angus Thomson, AASB’s Research Director, presented the Australian and New Zealand insurance papers on contractual service margin (CSM) and discount rates generated significant debate with ASAF members expressing mixed views.

Fellow IASB members were generally not supportive of changes to permit CSM the contractual service margin amortisation on a basis other than the passage of time basis.  However there were differing views among ASAF members on whether the risk margin, which is determined from the insurer’s viewpoint, captures all the elements that can be expected to vary over the life of a contract.

Many ASAF members and the IASB members present were receptive to making the profit or loss accounting policy choice an approach with only current inputs. There remain concerns about comparability with the OCI accounting policy choice and a need for some type of disclosure to enable that comparison. Ideas were raised on how that comparison might be achieved without the need for entities applying the profit or loss policy choice to re-work the information to show how the OCI policy choice would appear.

The issue of insurers having to apply IFRS 9 twice (when IFRS 9 mandatorily applies and subsequently when they apply the new insurance IFRS), were also discussed. The possible solutions raised included deferring the application date of IFRS 9 for insurers, or ‘quarantining’ the impacts in OCI until the new insurance IFRS is applied. It is not yet clear whether there would be an impact for Australian insurers if any of these approaches were pursued.