The International Accounting Standards Board (IASB) is seeking comments on how it should handle insurers, and investment-linked insurance funds, in a revision of investment entity accounting rules.
IASB, London, mentions insurers briefly in an exposure draft version of an Investment Entities document.
IASB, a group that sets accounting standards outside the United States, and the U.S. standards setter, the Financial Accounting Standards Board (FASB), Norwalk, Conn., are trying to fine-tune the rules that govern when public companies must consolidate investment performance with other results and when companies must break out investment results separately.
IASB has adopted International Financial Reporting Standard (IFRS) 10 Consolidated Financial Statements to require consolidation in most cases, to keep companies from hiding investment performance off their balance sheets.
Now IASB is working on an exemption for investment entities because of reports that investors want to see investment entities break out the performance of their investments.
FASB is working on a draft that will cover similar questions, IASB officials say.
IASB officials note in an explanation of the exposure draft that they are trying to keep companies from using captive investment entities to carry out off-balance-sheet by imposing some restrictions.
If an investment entity has just one significant unrelated investor, and that one unrelated investor happens to be an insurance company, IASB may keep that entity from qualifying for the investment company exemption.
“Should an entity still be eligible to qualify as an investment entity if it provides (or holds an investment in an entity that provides) services that relate to: (a) its own investment activities? (b) the investment activities of entities other than the reporting entity?” IASB officials ask. “Why or why not?”
Elsewhere, IASB officials ask how they should treat “venture capital organisations, mutual funds, unit trusts and similar entities including investment-linked insurance funds.”
IASB officials are asking for comments on whether they should impose a reporting strategy on companies such as investment-linked insurance funds or let the companies choose a strategy.
Comments on the draft are due Jan. 5, 2012.
- Allison Bell