The Financial Supervisory Service said it will stop the exception accounting (carve-out) related to Samsung Life Insurance's equity stake in Samsung Electronics and apply the standard accounting rules starting at the end of next year. It said there is no reason to spark unnecessary international controversy now that the new insurance accounting regime (IFRS 17) has taken hold.
On the 1st, the Financial Supervisory Service (FSS) said it held a joint meeting with the Accounting Standards Board and others for a K-IFRS Q&A and decided to end Samsung Life Insurance's exception accounting. Accordingly, Samsung Life Insurance had been recording the dividends payable to with-profit policyholders as a policyholder equity adjustment (liability), but going forward it must specify them as insurance contract liabilities under the insurance accounting regime (IFRS 17).
Earlier, in the 2022 joint meeting Q&A, under management's judgment that applying standard accounting to with-profit insurance contracts could mislead financial statement users, the amounts were treated as a policyholder equity adjustment under liabilities.
When the carve-out ends, with-profit insurance contracts must be presented in the financial statements separately from other insurance contracts to comply with K-IFRS principles. Detailed notes must be provided on regulatory requirements related to the insurance industry and the impact of interest rate risk.
The FSS said, "It is hard to conclude that applying IFRS 17 to life insurance companies' obligations to pay dividends related to with-profit insurance contracts could mislead financial statement users, and as the guidance period has passed and the system is stabilizing, there is a need to resolve unnecessary controversy arising from maintaining the exception accounting."
In particular, it added, "Considering some views that, if domestic life insurance companies continue to apply exception accounting, it may be difficult to regard Korea as a country that has fully adopted IFRS, we judged it reasonable to end the exception accounting at this point."