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Eхроsurе drаft-Insurаnсе Соntrасt comment letters evaluation

Running head: EХРОSURЕ DRАFT-INSURАNСЕ СОNTRАСT COMMENT LETTERS EVALUATION 1 Eхроsurеdrаft-Insurаnсе Соntrасt comment letters evaluationTheIASB published an exposure draft on insurance contracts and expectedcomments from various shareholders in the insurance sector by 25thOctober 2013. The exposure draft makes its proposals supersede theIFRS 4 insurancecontractssince the IFRS lacks a comprehensive standard for accounting ininsurance (IASB, 2013). This paper seeks to analyze two commentletters that followed the publication of the exposure draft. Thecomment letters include one from Sandler O’Neill and partners andanother one from the APEC business advisory council.TheSandler O’Neill and partners letter is lengthy and raised a numberof concerns. The letter vehemently opposes various proposals pointingout that the preparers and investors will be short charged if theproposals are to be taken as they are. In this letter, the writerpoints out some of the concerns they raised in past with regards tothe previous IASB proposals. The concerns included increasedvolatility in insurers’ equity and earnings and increasing the costand reducing the insurers’ capital (Longino , 2013).Sandler O’Neilland partners point out various issues in the current proposal thatinclude the redefinition of an insurance contract which they claimignores the identity of the issuer and uses the characteristic of theinstrument in its definition. In addition to that, they raise anissue with respect to the fair value measurement of the contracts. TheAPEC business advisory council letter on the other hand is quiteshort. Just like the Sandler O’Neill and partners letter, concernsthat were previously raised in the past exposure draft are pointedout. The APEC letter appreciates some of the proposed changes whichinclude use of OCI in discount rates and volume informationpresentation in the statement of comprehensive income (Wardhana,2013). However, a number of concerns are raised. They include thescope of the contracts, complexity of the measurement model andconsistency of the measurement model. The council is of the view thatthe scope of contract is limited by the “mirroring approach” andthat the measurement model is complex and would present the insurerswith excess costs and practical burdens. Unlike the Sandler O’Neilland partners letter, the APEC letter gives a numbers of proposals.ReferencesIASB(2013). ExposureDraft- Insurance Contract.IFRS Foundation

Longino.J (2013, September 19). Letterto the FASB and IASB.Sandler O’Neill and partners

Wardhana,W (2013, October 10). Letterto the FASB and IASB.The APEC business advisory council