The International Accounting Standards Board (IASB) issued IFRS 17 on 18 May 2017. IFRS 17 introduces consistent accounting requirements to address inadequacies in IFRS 4, which allows companies to use a wide range of different insurance accounting practices. IFRS 17, as originally issued, would replace the accounting requirements in IFRS 4 Insurance Contracts on 1 January 2021.
The IASB has since carried out outreach activities and having considered the concerns and challenges raised by the stakeholders, the IASB decided to propose the following targeted amendments to IFRS 17.
In the Exposure Draft, the IASB proposed to:
|1.||defer the mandatory effective date from 2021 to 2022.|
|2.||exclude two additional types of insurance contracts—loan contracts and credit card contracts that meet specified criteria from the scope of IFRS 17|
|3.||allow allocation of acquisition costs to expected contract renewals.|
|4.||attribute the expected profit to investment-return service and investment-related service.|
|5.||permit a company to use the risk mitigation option when the company uses reinsurance contracts held to mitigate financial risks of insurance contracts with direct participation features.|
|6.||require company to recognise a gain on reinsurance contracts held, for those underlying insurance contracts that are onerous at initial, to the extent of the claims recovered.|
|7.||require a company to present insurance contract assets and insurance contract liabilities on the balance sheet using portfolios of insurance contracts rather than groups of insurance contracts.|
|8.||add three additional transitional reliefs for the benefit of companies applying the Standard for the first time to address concerns that the transition requirements in IFRS 17 are costly and burdensome to apply|
These proposed amendments would not change the fundamental principles of the Standard because that would result in a significant loss of useful information for investors relative to that which would otherwise result from applying IFRS 17 as originally issued. The IASB expects that the proposed targeted amendments will ease implementation of the Standard by reducing implementation costs for companies and making it easier for companies to explain the results of applying IFRS 17 to investors and others.
Invitation to comment
The Exposure Draft is open for comment until 19 August 2019.
You may provide your comments online or email us at firstname.lastname@example.org.