The financial authorities are expected to decide as early as next week whether to end the exceptional application (departure accounting) of International Financial Reporting Standard 17 (IFRS 17), maintained for three years, for the 8.51% equity in Samsung Electronics held by Samsung Life Insurance.
According to the financial sector on the 30th, the Financial Supervisory Service and the Korea Accounting Standards Board will hold a joint Q&A session on Dec. 1 to discuss whether to maintain departure accounting under the new standards for life insurers, including Samsung Life Insurance.
At the heart of the departure accounting debate is whether to treat the dividends that should go to policyholders of participating policies previously sold by Samsung Life Insurance as a "liability" that the insurer must repay. A participating policy is a product that pays out to policyholders a portion of the excess gains generated from an insurer's investments.
Previously, Samsung Life Insurance used funds raised from selling participating policies in the 1980s and 1990s to purchase an 8.51% equity stake in Samsung Electronics. Under IFRS 17, newly introduced in Korea in 2023, Samsung Life Insurance must record the portion of its Samsung Electronics equity attributable to policyholders as an "insurance contract liability."
However, the Financial Supervisory Service allowed an exception so it could be recorded as a liability item called "policyholder equity adjustment." Considering that, under the new standards, Samsung Life Insurance's insurance liabilities could be understated compared with before and cause misunderstanding, it applied a "departure clause."
When Samsung Life Insurance sold part of its Samsung Electronics equity in Feb., some raised the issue that the accounting for the policyholders' share under participating policies should be changed to align with international standards.
The Financial Supervisory Service is said to have internally decided not to allow departure accounting. Lee Chan-jin, governor of the Financial Supervisory Service, recently said at a National Assembly audit, "On the matter related to departure accounting, internal coordination has concluded that it should be done in line with international accounting standards."