Both global accounting boards have agreed on how insurers should present their insurance contract information in balance sheets.

The International and Financial Standards Accounting boards decided at a meeting in London that insurers should put expected future cashflows, risk adjustment, residual margin and the effect of discounting in the balance sheet or include it in the notes accompanying financial statements.

The two boards did not agree on how cashflows relating to the recovery of acquisition costs of the contract should be presented, and will discuss this at future meetings.

But they did agree on how the liability for remaining coverage should be presented, saying insurers using a premium allocation approach should present the liability separately.

Insurers will be required to present all insurance contracts rights and obligations on a gross basis in the financial accounts.

If they use the building block approach, “any unconditional right to premiums or other considerations should be presented in the statement of financial position as a receivable”, the boards said.

These should be separated from the insurance contract asset or liability “and should be accounted for in accordance with existing guidance for receivables”.

“The remaining insurance contracts rights and obligations should be presented on a net basis in the statement of financial position,” the boards said.

In a separate decision, the two boards “tentatively” decided an insurer should present premiums, claims, benefits and the gross underwriting margin in the statement of comprehensive income.

The boards will consider at a future meeting whether these items should be presented in the statement of comprehensive income separately for contracts measured using the building block approach and the premium allocation approach.

Other decisions at the meting included the exclusion of fixed-fee service contracts from the scope of insurance contract reporting.

This will be allowed as long as the contracts are not priced on the basis of an assessment of the risk associated with an individual client and they compensate clients by providing a service rather than a cash payment.

The two boards will meet again in London later this month to thrash out more details of the insurance contracts accounting standard.