FASB Plan Riles Group Of N.A. Insurance Enterprises

NU Online News Service, Oct. 16, 12:25 p.m. EDT

A U.S. Financial Accounting Standards Board proposal, intended to improve existing financial statements' fair value accounting measurements, will actually make them difficult to compare and interpret, an insurance industry group said.

That analysis, coupled with a letter to the FASB asking it to make changes, came from the Group of North American Insurance Enterprises (GNAIE).

FASB's objective in making the changes is an enhancement of the disclosures where fair values are measured using non-market observable inputs and better aligning disclosures about fair value measurements with those required under International Financial Reporting Standards (IFRS 7), GNAIE said.

In a comment letter written Tuesday, however, GNAIE said that in aligning its Proposed Accounting Standards Update (ASU) on improving disclosures of fair value measurements with the international standard, FASB should first evaluate global implementation practices to determine whether global conformity exists.

Moreover, GNAIE said it believes enhanced disclosures for Level 3 measurements should be qualitative, focusing on the potential variability of reasonably possible significant inputs, the causes of that variance and how the reporting entity arrived at the reported fair value.

Providing the type of enhanced disclosures where the majority of a fair value measurement is affected by inputs that are not market observable would align the required disclosures provided by IFRS reporters and limit incremental disclosures to those that are most relevant to financial statement users, according to GNAIE.

"If the scope of the proposed ASU is not revised, we are concerned that the information may not be comparable among companies and will provide more difficulty for financial statement users to interpret due to the quantity of instruments subjected to the requirements and the wide variations in grouping, estimating and presenting Level 3 sensitivities," said the letter from Kevin Spataro, chair of GNAIE'S Accounting Convergence Committee, to FASB chairman Robert Herz.

GNAIE added that FASB's approach would not achieve the objective of improving disclosures for Level 3 fair value measurements and the proposed effective dates do not provide enough time to develop and execute necessary implementation plans.

The GNAIE organization said its goal is "to influence international accounting standards to ensure that they result in high-quality accounting and solvency standards for insurance companies and, to that end, to increase communications between insurers doing business in North America and international regulators and standard setters."

To meet its goals GNAIE said it works at modeling proposed accounting standards, analysis, comment and coordination with various end users of financial reports.