FSS: "Samsung Life Insurance May Record Contractual Dividend Liabilities Related to Samsung Electronics"

Capital and Liability Selection Possible Based on IFRS 1001 Exception Application

[Asia Economy Reporter Minwoo Lee] The Financial Supervisory Service (FSS) has determined that Samsung Life Insurance can classify the policyholder dividends related to its Samsung Electronics shares as liabilities rather than equity in its accounting.

On the 28th, the FSS stated that even with the introduction of the new International Financial Reporting Standard (IFRS 17) starting next year, Samsung Life can continue to present the amount to be returned to policyholders from the valuation gains on Samsung Electronics shares (policyholder interest adjustment) as a liability, as before.

The FSS explained, "If the company's management judges that the liability amount previously reported was understated and could cause misunderstanding among financial statement users after applying K-IFRS 1117 to the policyholder interest adjustment, it may be treated as a liability according to paragraph 19 of K-IFRS 1001 (exceptional application under IFRS standards)."

Originally, from next year, under the new accounting standards, policyholder dividends with discretionary participation features are to be classified as equity and only recognized as liabilities if there is a plan to sell. However, the authorities have granted Samsung Life the option to classify them as liabilities based on the exceptional application clause in K-IFRS 1001. Previously, Samsung Life inquired with the FSS whether it could classify the amounts payable to customers as liabilities, given potential disagreements over classifying them as shareholders' equity.

Regarding the stated purpose of Samsung Life's holdings of Samsung Electronics shares, the FSS drew a clear line, saying it is a separate issue. There have been concerns that whether Samsung Life classifies its 8.51% stake in Samsung Electronics as strategic holdings (shares not intended for sale) or investment holdings (shares intended for sale) could affect Samsung Life's capital size and profit or loss fluctuations due to stock price changes.

In response, an FSS official said, "For equity securities valuation, regardless of the holding purpose, companies can choose to account for them through profit or loss or other comprehensive income. For equity securities held as resources for policyholders with discretionary participation features, the accounting treatment does not change depending on whether there is a plan to sell."

An insurance industry official commented, "It seems that Samsung Life was given the option but with the implication that it must take responsibility regardless of future circumstances. Nonetheless, it is true that Samsung Life now has greater flexibility."

This content was produced with the assistance of AI translation services.