News highlights for May 2014

FASB will consider targeted changes rather than a significant overhaul of U.S. GAAP’s financial reporting requirements for insurance contracts.

The board voted to consider potential targeted improvements to long-duration insurance contracts. For short-duration contracts, the board will consider targeted improvements that will be focused solely on disclosures.

Board members decided not to continue with a comprehensive project on accounting for insurance contracts.

“I would rather be surgical and additive to what we have today,” FASB member Marc Siegel said during the board meeting.

FASB also chose not to postpone its deliberations until the International Accounting Standards Board (IASB) issues a final insurance contracts standard. FASB members expressed a desire for consistency with the IASB as improvements are made, but the vote signals a different general direction for FASB from the IASB in one of four remaining major convergence projects between the organizations.

Convergence in the project has been a challenge because the boards started in different positions. FASB already has a standard for insurance contracts, while the IASB has no such standard. So FASB has focused on developing guidance that improves current U.S. GAAP, while the IASB’s task is to create a standard.

“This project to me has been challenged from the start,” board member Tom Linsmeier said.

Two AICPA committees have encouraged the boards to find common solutions but also said high-quality accounting standards should not be sacrificed in the name of convergence.