Now that the exposure draft for IFRS 4 Phase II has been published, insurance companies can get a better understanding of its implications and consider how they would need to adjust their insurance related balances. However, the impact on tax, both current and deferred, is more uncertain.
Although it is difficult to predict how or when different fiscal authorities will react, insurers need to understand the potential impact tax could have on the conversion to IFRS 4 Phase II. Even where there is no change to current tax, IAS 12 will require deferred tax to be addressed where differences arise between the book basis and the tax basis. This will impact the deferred tax amounts recorded.
At the very least, insurers should closely monitor developments to the tax regime in this area and maintain close contact with local regulators and fiscal authorities to keep on top of any developments. To learn more about these issues please on the link below and read our brochure in full.