FASB seeking comments on bifurcation of insurance, reinsurance contracts.As part of a broader initiative to improve financial reporting for insurance accounting, the Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). recently announced it is seeking constituent comment and perspective on the potential bifurcation Bifurcation A term used in finance that refers to a splitting of something into two separate pieces. Notes: Generally, this term is used to refer to the splitting of a security into two separate pieces for the purpose of complex taxation advantages. of insurance and reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. contracts into insurance components and financing components. Comments are due Aug. 24 (visit www.fasb.org for the proposal). The Invitation to Comment reflects the board's concern about a possible lack of transparency in the financial statements of both policyholders and (re)insurance companies relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the depiction of insurance risk associated with contracts that include terms or features that significantly limit the actual amount of risk transferred. Such contracts are frequently referred to as finite risk contracts, though the ITC ITC (Brit) n abbr (= Independent Television Commission) → Fernseh-Aufsichtsgremium ITC n abbr (BRIT) (= Independent Television Commission) → is not exclusive to finite risk contracts. Information is sought about whether bifurcation would improve financial reporting by providing financial statement users with better data about the economic substance of insurance arrangements. The Invitation to Comment requests specific information from buyers and sellers of insurance and reinsurance contracts and the users of their financial statements. |
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