Comments On Financial Instruments Reporting Complexity Reduction Discussion Paper Due September 18
Sep 17, 2008
Ramon Calderon, Chairman of the National Association of Insurance Commissioners (“NAIC”) International Solvency & Accounting Working Group has requested that comments be submitted by September 18, 2008 (one day earlier than scheduled) on the Discussion Paper draft of “Reducing Complexity in Reporting Financial Instruments.”
A letter from Chairman Calderon is reprinted below and supporting documents are attached for your review.
Should you have any questions or comments, please do not hesitate to contact Colodny Fass.
A Letter to the NAIC International Solvency & Accounting Working Group from Chairman Ramon Calderon:
To Members and Interested Parties of the International Solvency & Accounting Working Group
At the Summer National Meeting in San Francisco, we provided members with a “first draft of a response to the paper on reducing complexity in reporting financial instruments” and I “asked that members send any comments to Mr. Esson.” No members objected to the thrust of that draft.
The IAIS’ Insurance Contracts Subcommittee discussed the paper at meetings in June and July, with a follow up teleconference in August.
The discussion paper sets out proposals to reduce the complexity of IAS 39 (the financial instruments standard) and in the longer term sees fair value as the only candidate which would work as a single measurement attribute. The paper considers how the IASB could work towards this ultimate objective, including whether or not interim steps should be taken.
Members of the subcommittee expressed different views as to whether an ultimate single measurement attribute should be under consideration, at least at present. Some members, particularly those representing integrated supervisors, have been concerned about difficulties which this objective, and the reduction of optionality, would present for the banking sector. In preparing the draft comments the IAIS was therefore careful to focus on the insurance sector, taking into account likely developments on the insurance contracts project and seeking to avoid accounting mismatches both until the Phase II standard is introduced and thereafter, for insurance.
However, in the compromises necessary to achieve a consensus at the IAIS, a recommendation was lost which Rob Esson feels is important. As you all know, the NAIC has invested a great deal in sending Rob to numerous IASB meetings and working groups over the last 4 – 5 years. He is concerned that the Board is almost certainly going to move at least partially in the direction of more fair value measurement, notwithstanding the objections of the integrated regulators. He has therefore recommended to me, and I agree, that we should resurrect a recommendation from the Summer draft that would be designed to ‘do the least harm’ if such a move is made, while giving more time to work on the thorny issues of fair value measurement for assets in illiquid markets and on the appropriate fair value measurement of liabilities.
The draft letter attached is therefore designed to do this, without taking a firm position on whether the IASB should actually pursue a long term goal of a single measurement attribute of fair value through profit and loss for all financial instruments. Additionally, the draft IAIS letter and the discussion paper are attached.
Based on the lack of objection to the prior draft, and the fact that the current suggested letter is largely a cut and paste of two items from that draft, I would like to ask members to let me know no later than Thursday, September 18, whether they object to the letter as drafted being submitted to the IASB.
I apologize for the very brief comment period; I have been occupied with some critical issues within my Department.
Sincerely,
Ramon Calderon
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