IASB issued an amendment to IFRS 4 Insurance Contracts

News

IFRS news | 26 September 2016

IASB issued an amendment to IFRS 4 Insurance Contracts to address concerns about the different effective dates of IFRS 9 and the new insurance contracts Standard that will replace IFRS 4

The amendment provides entities meeting a criterion for engaging in predominantly insurance activities with the option to continue current IFRS accounting and to defer the application of IFRS 9 until the earlier of the application of the new insurance Standard or periods beginning on or after 1 January 2021 (the “sunset clause”).

The insurance activities predominance criterion is intended to be restrictive, but has been relaxed somewhat to allow for a degree of judgement compared to the proposals contained in the exposure draft the IASB published in December 2015.

The assessment of predominance has to be made at the reporting entity level and at the annual reporting date immediately preceding 1 April 2016. Thereafter it should not be reassessed, unless there is a significant change in the entity’s activities that would trigger a mandatory reassessment.

Separately, the amendment provides all entities with contracts within the scope of IFRS 4 with an option to apply IFRS 9 in full but to make adjustments to profit or loss to remove the impact of IFRS 9, compared with IAS 39, for designated qualifying financial assets. This is referred to as the ‘overlay approach’ and is available on an asset‑by asset basis with specific requirements around designations and de‑designations.

Both the temporary exemption and the overlay approach are also available to first – time adopters of IFRSs.

Download the PDF

Subscribe to get free IFRS news | IFRS News 2016 | Archive 2015 | Archive 2014

Stay connected and share your thoughts via social media.

Did you find this useful?