Financial Services Ireland


IASB proposes further changes to IFRS 17

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At its meeting on 14 March 2019, the IASB proposed further changes to IFRS 17, tentatively deciding to:

  • Exclude from the scope of IFRS 17, credit cards that provide insurance coverage where the entity does not reflect the individual customer’s insurance risk in setting the price of the contract.
  • Permit an entity to apply the risk mitigation option under the variable fee approach (VFA) prospectively from the IFRS 17 transition date if it has designated the relevant risk mitigation relationships no later than that date.
  • Allow an entity that is able to use the fully retrospective approach on transition to use the fair value transition approach instead for groups of contracts subject to the VFA if the entity:
    • chooses to apply the risk mitigation option prospectively from the transition date; and
    • has used derivatives or reinsurance contracts to mitigate financial risks prior to transition date.
  • Amend certain IFRS 9 transition requirements for loans that transfer significant insurance risk, to which an entity elects to apply IFRS 9 on initial application of IFRS 17, if the entity already applies IFRS 9.
  • Amend disclosure requirements relating to the contractual service margin (CSM) by requiring:
    • quantitative disclosure of the expected recognition in profit or loss of the CSM balance; and
    • disclosure of the approach to assess the weighting of benefits provided by insurance coverage, investment-related services, or investment return services.
  • Amend disclosure requirements for assets arising from insurance acquisition cash flows not yet included in the measurement of recognised groups of insurance contracts by requiring:
    • a reconciliation of the asset and its changes in each period, including any impairment loss or reversals; and
    • quantitative disclosure of the expected inclusion of these acquisition cash flows in the measurement of the related group of insurance contracts in appropriate time bands.

The Board decided to retain all other disclosure and transition requirements in IFRS 17 and considered that no further disclosure amendments other than those outlined above were necessary as a result of the proposed amendments to IFRS 17.

The Board also decided not to change the existing requirements in IFRS 17 related to the level of aggregation (see below for more detail).

The IASB has now completed its consideration of the 25 topics raised in its October 2018 Board meeting. The Board will consider in its April 2019 meeting the total package of proposed amendments to determine whether: (a) the benefits of the changes outweigh their costs; and (b) the changes do not unduly disrupt implementation. An Exposure Draft of the proposed amendments to IFRS 17 is expected by June 2019. The staff indicated that they would seek permission from the IFRS Foundation’s Due Process Oversight Committee for a comment period less than 120 days.

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Ciara McKenna

FS Partner, Assurance, Insurance
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