Tag Archives: accounting

Market risk benefits: What is in scope?

The Financial Accounting Standards Board recently approved changes to the accounting for long-duration insurance contracts. This included the creation of a new category of benefits called market risk benefits. This paper by Milliman consultant William Hines discusses market risk benefits and contract features that might be within their scope.

FASB approves targeted improvements

The Financial Accounting Standards Board (FASB) has approved the issuance of a final Accounting Standards Update (ASU) of targeted changes to the accounting for long duration insurance contracts. The targeted improvements will be effective in 2021 with early adoption permitted. This paper by Milliman consultant William Hines outlines the decisions and discussions at the June 6, 2018, FASB meeting.

IFRS 17: Discount Rates

There are a number of areas of International Financial Reporting Standard (IFRS) 17 where the International Accounting Standards Board has allowed firms to make choices on their approaches. This paper by Milliman consultants focuses on the approaches available under IFRS 17 for the derivation of the discount rates for use in the various calculations required by the Standard.

Estimating credit losses for the lifetime of a loan

On December 20, 2012, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) that discusses changes to the ways banks recognize and account for potential credit losses (the ASU is “Financial Instruments—Credit Losses,” Subtopic 825-15). A simple summary of the update is that the FASB proposes that banks and other financial institutions modify recognition of impairment from a “probable loss” to a “lifetime of loss” estimate.

For mortgages, this means changing the base of the impairment provision from a provision for losses arising from the current delinquency inventory to a provision for all mortgages, recognized at origination. Impairment provisions for delinquent loans are typically estimated using a roll-rate model based on recent experience.

Milliman’s Eric Wunder and Jonathan Glowacki provide a methodology to estimate credit losses (including losses on loan repurchases) for the lifetime of a loan in this article.