The be costly and are not worth the time

                The
theory of insurance has been around as long as humans have. The point of
insurance is to aid in eliminating risks and spreads the risk from the
individual to a larger community which diminishes the threat that all insurance
policyholders will have losses at the same time. Insurance also offers a significant
foundation of long-term finance for both the public and private sectors.  Insurance contracts in financial statements
are to be categorized as short-duration or long-duration contracts. Long term
contracts contain contracts such as whole-life insurance and annuities, where
short term contracts would include property and liability insurance contracts. All
insurance policies have a requirement to be in a legal form or document.   In American insurance policies are controlled
the Financial Accounting Standards Board (FASB) where by state law and each
state may specify that they only need specific forms for specific types of
insurance. Furthermore, to make sure these regulations are being obeyed these
policies must be then accepted by the state insurance department. There are
also insurance rules from the International Financial Reporting Standards
(IFRS) that must be followed by the world about how particular types of
transactions should be reported in financial statements, like how to insurance
companies report their statements. In this past year, there have been two major
rules created by FASB and IFRS that are becoming issues for accountants due to
the time and energy that has to be given to follow them. ASC 606 is being
proposed by FASB to progress financial standard on recognition of revenue from
contracts with customers. IFRS 17 is IFRS’s new insurance contract that will
entail detailed disclosures for insurance company’s financial statements. The
changes to the disclosures will offer investors more info on these insurance
companies recognized amounts from insurance contracts and the extent of risks ascending
from their insurance policies. (Chan, 2016) Some feel that these rules will be
costly and are not worth the time and energy, while others, like myself, feel
that they are much needed and will completely help the insurance industry.

            FASB
and the International Accounting Standards Board (IASB) distributed joined
direction on recognizing revenue from contracts with customers. The new guidance
is a major achievement to improve this important area of financial reporting. In
June 2014, the FASB and the IASB proclaimed the creation of the FASB-IASB Joint
Transition Resource Group for Revenue Recognition (TRG). The objective of this
group is to notify the Boards about possible application problems that might
occur when businesses state using the newly created revenue standard. The group
was also in place to help investors better comprehend explicit facets of the
newly created standards. ASC 606, Revenue from Contracts with Customers,
was issued mutually by the FASB and IASB on May 28, 2014. For public
entities, the original active date for yearly reporting periods begin after
December 15th, 2016. The ASC 606 rule was then differed to the active date of
for another year, so public business entities, not-for-profit entities, and
employee benefit plans, the effective date would begin after December 15, 2017.
All other entities the effective date would be after December 15th, 2018. (ASC
606 — Revenue from Contracts with Customer, n.d.) The new amendment will be
effecting all businesses that have contracts to transfer goods and services to
clients in exchange for money. The purpose of ASC 606 is to create guidelines
on how to account for the nature, timing and risk of revenue from contracts
with customers for the users of financial statements. The ones that made this
standard want to remove discrepancies and flaws in the current revenue
requirements, have a stronger outline for revenue issues, and improving the
similarity of revenue recognition ways throughout all industries. The new ASC 606
standard will not alter the demands that revenue be acknowledged for only quantities
not anticipated to be returned. Though, because a right of return is in existence
marks the price flexible and subject to the constraint which will end in a variation
in timing of revenue recognition to the degree a company determines that the appraised
sum varies from the estimation under current GAAP rules. Being consistent with
GAAP rules, rights of return can be contractual or based on a business’s
customary practice. (Impact of the New Revenue Recognition Standard, 2015)Also,
the standard was created to deliver improved disclosure rules and to streamline
how the statements are arranged by decreasing the quantity of requirements that
the companies must obey by. All insurance contracts are to be recorded under
the same guidelines as before, ASC 944, however some insurance companies
usually perform other services to their customers that are actually not thought
of as insurance contracts under ASC 944. In these cases, the need to conform
and understand ASC 606 is significant and must not be ignored. These types of
other services that insurance companies do that are not under ASC 944 which
include but are not limited to agency and advisory type arrangements, claims
processing, property valuation, appraisal services, and info risk management
services. These types of services could be done on an unrelated basis from the
underlying insurance contract and the performance obligations might be
different for those services in comparison to the performance obligations of
the underlying contract. What this leads to is the need to separately recognize
and calculate the suitable revenue recognition arrangement for each performance
obligation acknowledged by the insurance company. This will create some challenges
when the contract amount for insurance intermediaries includes services for
claims handing, policy endorsements, risk management and must be independently be
examined for allocation of the contract amount to these performance
obligations. However, this will be drastically beneficial for the insurance
company financial statement users to understand the risks and rewards of this
company. (Jacobs, 2016)

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