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  #1  
Old 05-05-2009, 12:44 PM
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Question Fair Value: Unfair?

Quote:
Insurers Support Report Of U.S. Chamber Coalition That Found Fair Value Accounting Reforms Fall Short Of Fixing Problems
NEW YORK, May 5 -- The Group of North American Insurance Enterprises (GNAIE) endorsed a new report released by the Fair Value Coalition of the U.S. Chamber of Commerce that ... despite changes to fair value accounting standards, adherence to exit prices continues to keep in place the existing valuation mechanisms that exacerbate non-economic losses in inactive markets. As a result, the ability to value assets in inactive markets remains problematic at best.

Furthermore, the report also determined that FASBís changes to impairment rules retained a significant recognition of non-economic losses, impeding the ability for accurate reporting of credit and non-credit related losses.
...
The intent of the changes to fair value accounting was to recognize true economic losses and allow for a realistic valuation of assets. Some of the changes to the standards fell short of that goal. If these problems are not fixed, financial reporting problems will continue to adversely impact the economy during its worst crisis in 75 years. ...
http://insurancenewsnet.com/article....p_lh&id=105839
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  #2  
Old 05-06-2009, 11:54 AM
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Who is "The Group of North American Insurance Enterprises (GNAIE)"? That's a new one on me.
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  #3  
Old 05-06-2009, 12:02 PM
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See wikipedia
They have submitted comments regarding various drafts of international initiatives re: Fair Value Accounting and Solvency II.
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Old 12-08-2009, 09:45 AM
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It gets worse. Apparently the latest decision by the accountants is that acquisition expense should not be capitalized (no DAC) and that the impact should flow through to the bottom line. Every policy sold will increase the reported losses.

I sure do hope the IAA is going to challenge IASB on this, and that the AAA will challenge FASB.
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My latest favorite quotes, updated Apr 5, 2018.

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And def agree w/ JMO.
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This. And everything else JMO wrote.
And this all purpose permanent quote:
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  #5  
Old 12-08-2009, 09:52 AM
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Originally Posted by JMO View Post
It gets worse. Apparently the latest decision by the accountants is that acquisition expense should not be capitalized (no DAC) and that the impact should flow through to the bottom line. Every policy sold will increase the reported losses.

I sure do hope the IAA is going to challenge IASB on this, and that the AAA will challenge FASB.
Really? Where did you see this? Not that I don't believe you, but it seems like that'd be a big deal if it were true.
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  #6  
Old 12-08-2009, 09:55 AM
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See this newsletter from Deloitte.
http://www.iasplus.com/uk/0911ukinsuranceifrs.pdf

"The boards seemed to have acknowledged that their decision may not represent the economics of selling a profitable insurance contract. However, the attraction of reaching a decision that aligns insurance accounting with the general principles of accounting for the sale of bread and milk appeared an irresistible incentive at the October joint meeting."
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And def agree w/ JMO.
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This. And everything else JMO wrote.
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Last edited by JMO; 12-08-2009 at 10:00 AM..
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  #7  
Old 12-08-2009, 11:07 AM
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Quote:
Originally Posted by JMO View Post
It gets worse. Apparently the latest decision by the accountants is that acquisition expense should not be capitalized (no DAC) and that the impact should flow through to the bottom line. Every policy sold will increase the reported losses.

I sure do hope the IAA is going to challenge IASB on this, and that the AAA will challenge FASB.
Except for commissions, I agree with this logic
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  #8  
Old 12-08-2009, 11:10 AM
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Except for commissions, I agree with this logic
Commissions seems to have been what they focused on. See quote above and note that "underwriting" is not a function in non-insurance enterprises. This went right under their radar.

(I wonder whether oil exploration costs will no longer be capitalized. . .)
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Pluto is no longer a planet and I am no longer an actuary. Please take my opinions as non-actuarial.


My latest favorite quotes, updated Apr 5, 2018.

Spoiler:
I should keep these four permanently.
Quote:
Originally Posted by rekrap View Post
JMO is right
Quote:
Originally Posted by campbell View Post
I agree with JMO.
Quote:
Originally Posted by Westley View Post
And def agree w/ JMO.
Quote:
Originally Posted by MG View Post
This. And everything else JMO wrote.
And this all purpose permanent quote:
Quote:
Originally Posted by Dr T Non-Fan View Post
Yup, it is always someone else's fault.
MORE:
All purpose response for careers forum:
Quote:
Originally Posted by DoctorNo View Post
Depends upon the employer and the situation.
Quote:
Originally Posted by Sredni Vashtar View Post
I feel like ERM is 90% buzzwords, and that the underlying agenda is to make sure at least one of your Corporate Officers is not dumb.
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  #9  
Old 12-08-2009, 12:27 PM
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So, just to be clear, you think that if Company A and Company B sell the exact same policy to the exact same customer save for one difference: A pays $100 in commission and B pays $200. Then B gets to capitalize $200 of profits up front but A only $100? And that makes sense to you?

And if the capitalized profits to be earned on the contract depend on earning credit spreads, the nonsense of traditional accounting only multiplies.
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  #10  
Old 12-08-2009, 12:38 PM
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Quote:
Originally Posted by The Mad Hatter View Post
So, just to be clear, you think that if Company A and Company B sell the exact same policy to the exact same customer save for one difference: A pays $100 in commission and B pays $200. Then B gets to capitalize $200 of profits up front but A only $100? And that makes sense to you?

And if the capitalized profits to be earned on the contract depend on earning credit spreads, the nonsense of traditional accounting only multiplies.
The premiums will be different if the commissions vary that much. This was even part of the discussion in the link I provided.

I'm not supporting traditional accounting, I am challenging the decision not to capitalize acquisition costs - when the product pricing contemplates sufficient margin to amortize them. There are several categories of margin, and the one to amortize acquisition costs USED TO BE in the IASB proposal until FASB talke them out of it. And if the margins subsequently prove inadequate, the contemplated valuation process would take down those capitalized amounts. Sort of like how recoverability testing works today, but through a different mechanism.
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Carol Marler, "Just My Opinion"

Pluto is no longer a planet and I am no longer an actuary. Please take my opinions as non-actuarial.


My latest favorite quotes, updated Apr 5, 2018.

Spoiler:
I should keep these four permanently.
Quote:
Originally Posted by rekrap View Post
JMO is right
Quote:
Originally Posted by campbell View Post
I agree with JMO.
Quote:
Originally Posted by Westley View Post
And def agree w/ JMO.
Quote:
Originally Posted by MG View Post
This. And everything else JMO wrote.
And this all purpose permanent quote:
Quote:
Originally Posted by Dr T Non-Fan View Post
Yup, it is always someone else's fault.
MORE:
All purpose response for careers forum:
Quote:
Originally Posted by DoctorNo View Post
Depends upon the employer and the situation.
Quote:
Originally Posted by Sredni Vashtar View Post
I feel like ERM is 90% buzzwords, and that the underlying agenda is to make sure at least one of your Corporate Officers is not dumb.
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