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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] South Korea’s Financial Supervisory Service (FSS) is expected to decide as early as next week whether to end the controversial accounting exception that has allowed Samsung Life Insurance to treat participating-policyholder shares under a special “contractholder equity adjustment” category rather than as insurance liabilities under IFRS 17.
The FSS and the Korea Accounting Standards Board will hold a joint meeting on December 1 to review the issue, following formal inquiries submitted by the life insurance industry and civic groups.
At the center of the debate is whether Samsung Life may continue booking participating policyholder portions—stemming largely from its historical 8.51% stake in Samsung Electronics purchased with policyholder premiums in the 1980–1990s—outside insurance liabilities. IFRS 17 requires these amounts to be recorded as liabilities, but the FSS previously granted an exception to avoid misrepresenting the company’s financial position.
With Samsung Life having sold part of its Samsung Electronics stake earlier this year, calls have grown to bring its accounting treatment in line with global standards. FSS Governor Lee Chan-jin has already signaled that the agency is inclined to end the exception.
If the exception is removed, Samsung Life must reclassify the policyholder share either as capital or insurance liabilities, depending on internal judgment. A liability classification would weaken capital ratios, while classifying it as equity could spark backlash from policyholders who may view their stake as effectively disappearing from financial statements.
The amount involved has grown sharply as Samsung Electronics' share price has risen—from KRW 8.9 trillion at end-June to KRW 12.8 trillion at end-September.
The upcoming decision concerns only external financial reporting under IFRS. Supervisor-level accounting used for regulatory oversight—where the policyholder share is already treated as a liability—will not be addressed in the meeting and will remain unchanged until the regulations are formally amended.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
