(September 11 – 12:20 ET) – The Office of the Superintendent of Financial Instituions is announcing that federally regulated insurers have a new accounting standard to apply.
In a letter to insurers OSFI says that all life insurers must account for future income taxes on their financial statements in accordance with a new accounting standard. The new standard requires that any future tax asset or liability is to be calculated on an undiscounted basis and shown separately on the balance sheet.
The letter notes that Canadian Institute of Actuaries standards require that future income taxes attributable to the policy liabilities and to the specific assets supporting those liabilities be taken into account in the policy liabilities of the company. To avoid double counting future income taxes, the policy liabilities are adjusted by the appropriate amount of future income tax asset or liability required to be reported separately on the balance sheet.
For the purposes of their capital and surplus requirements insurers should include any future income taxes under the policy liabilities used in calculating negative reserves and cash value deficiencies. Future tax estimates should use valuation assumptions as required by CIA Standards.
Liabilities, however, are to be calculated prior to any accounting adjustment for balance sheet presentation. Similarly, the policy liabilities used in calculating the mortality, morbidity, lapse, interest margin pricing, and changes in interest rate environment components should be calculated according to CIA Standards prior to any accounting adjustment for balance sheet presentation.
The new standard applies for fiscal years beginning on or after January 1, 2000.
-IE Staff