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INSURANCE ACCOUNTING ALERT

IASB addresses five of the proposed IFRS 17 amendments

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At its January 2020 Board meeting, the International Accounting Standards Board (IASB or the Board) continued its re-deliberations on the proposed amendments in the Exposure Draft Amendments to IFRS 17 Insurance Contracts (the ED), in line with the plan outlined in its November 2019 meeting.

What you need to know

At its meeting on 30 January 2020, the IASB tentatively decided to:

  1. Amend the requirements related to interim financial statements in IFRS 17 to require an entity to:
    • Make an accounting policy choice on whether to change the treatment of accounting estimates made in previous interim
    financial statements when applying IFRS 17 in subsequent interim financial statements or the annual reporting period
    • Apply this policy choice at reporting entity level
  2.  Retain the existing IFRS 17 requirements for insurance contracts acquired in their settlement period in a portfolio transfer or business combination in the scope of IFRS 3
  3.  Change the requirements relating to the expected recovery of insurance acquisition cash flows on transition to IFRS 17
    and for contracts acquired in a portfolio transfer or business combination in the scope of IFRS 3 by amending:
    • IFRS 17 to require that an asset for insurance acquisition cash flows should be recognised at the transition date, and to
    specify requirements under the modified retrospective and fair value approaches
    • IFRS 3 and IFRS 17 to require recognition of a separate asset for insurance acquisition cash flows measured at fair value
    at acquisition date for contracts acquired in a portfolio transfer or business combination in the scope of IFRS 3
  4. Retain the prohibition from applying the risk mitigation option retrospectively at transition
  5. Confirm the proposed scope exclusion from IFRS 17 for certain credit card contracts and to introduce the following changes to the amendments proposed:
    • Require an entity that provides insurance coverage as part of the contractual terms of the credit card contract to:
    • Separate the insurance coverage component and apply IFRS 17 to it
    • Apply other applicable standards (such as IFRS 9) to the other components
    • Extend this amendment to other contracts that provide credit or payment arrangements similar to credit card contracts

The IASB expects to consider most of the remaining potential amendments to IFRS 17 at its February meeting, before reviewing the whole package of amendments and deciding on the effective date of IFRS 17 in March.

Click below to read our latest Insurance Accounting Alert for further details. If you have any questions, please reach out!

Ciara McKenna

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