IFRS in Focus
IASB amends IFRS 17 Insurance Contracts to assist implementation
Since the IASB issued IFRS 17, it has been undertaking a comprehensive programme of stakeholder engagement and has identified 25 concerns and implementation challenges, including those related to the balance of costs and benefits from applying IFRS 17. After due consideration, the IASB has proposed 13 amendments to IFRS 17 that in the Board’s view would not change the fundamental principles, would not result in the loss of user information and would not significantly disrupt implementation already underway. Those proposals are now exposed for comment, due by 25 September 2019.
Proposed amendments include:
- Deferral of the date of initial application of IFRS 17 by one year: The IASB proposes to amend the mandatory effective date of IFRS 17, so that entities would be required to apply IFRS 17 for annual periods beginning on or after 1 January 2022 and change the fixed expiry date for the temporary exemption in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after 1 January 2022.
- Additional optional scope exclusion for loan contracts that transfer significant insurance risk and related transition requirements to enable entities issuing such contracts to account for those contracts applying either IFRS 17 or IFRS 9
- Additional scope exclusion for credit card contracts that provide insurance coverage
- Insurance acquisition cash flows relating to expected contract renewals: Amendments regarding allocation, recognition, assessment of the recoverability, and disclosure regarding insurance acquisition cash flows relating to expected contract renewals
- Amendments regarding the contractual service margin (CSM) allocation relating to investment components and related disclosure requirements so that in the general model the CSM is allocated on the basis of coverage units that are determined by considering both insurance coverage and any investment return service.
- Extension of the risk mitigation option to include reinsurance contracts held
- Amendments to require an entity that at initial recognition recognises losses on onerous insurance contracts issued to also recognise a gain on reinsurance contracts held
- Simplified presentation of insurance contracts in the statement of financial position so that entities would present insurance contract assets and liabilities in the statement of financial position determined using portfolios of insurance contracts rather than groups of insurance contracts
- Additional transition relief for business combinations
- Additional transition relief for the date of application of the risk mitigation option and the use of the fair value transition approach
The latest issue of IFRS in Focus looks at the proposed amendments in detail and the potential impacts resulting from these suggested changes.