Global accounting standards bodies have agreed that an insurer’s profit and loss statement should be the primary source of financial information in an insurance contracts framework.

But at a meeting of the International Accounting Standards Board and the Financial Accounting Standards Board in London last month, the groups decided they will not define what the purpose of the statement should be.

They agreed income and expenses should be included in the profit and loss statement, unless there is a change in value of an asset or liability in the “other comprehensive income report”.

This change can only be made by an insurer’s board when setting accounting standards for the business.

“In making such a decision, the board would need to explain why excluding a change in the current value of an asset or a liability from the statement of profit or loss for the period would enhance the relevance of the information provided in that statement,” an International Accounting Standards Board report on the meeting says.

The accounting standards bodies accepted that income and expenses figures in the other comprehensive income report can also be used in the profit and loss statement.

The meeting also considered how insurers should measure the contractual service margin at the end of a reporting period.

The bodies decided the margin should represent the profit of future services.

This would see insurance contracts included in the margin that have cashflows in line with changes in key assumptions and expected profitability.

It was also agreed that an insurer should not apply the variable fee approach to reinsurance contracts issued or held.