Last week, the Financial Accounting Standards Board came out with a decision on how companies should treat the costs related to the terrorist attacks on Sept. 11.
Life insurers financially impacted by claims from the World Trade Center disaster say the directive will not change the way they account for claims on their income statement.
Directive 01-10 from the FASB’s emerging issues task force (see www.fasb.org) says the economic effects of the events are “so extensive and pervasive” that it would be impossible to present a complete picture of the disaster’s financial ramifications by including costs under an extraordinary item line in the income statement.
Consequently, the Norwalk, Conn.-based FASB says it is better not to use the extraordinary line item. An extraordinary line item recognizes gains and losses on the income statement after an operating subtotal and before the net income total.
Fred Donner, a partner with KPMG, LLP in New York, says there will be no impact for insurers. Although a “terrible tragedy with significant losses,” Donner says that from an insurer’s perspective, it is no different from any other catastrophe. “This is what they [insurers] do. They provide coverage for losses.”
James Harrington, a PriceWaterhouseCoopers partner in Florham Park, N.J., says normal claims would be part of expenses recognized in the portion of the income statement addressing operations.