This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice (http://www2.deloitte.com/ca/en/legal/cookies.html) for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

IASB finalizes narrow-scope amendments to IFRS 17 and IFRS 4

  • IFRS - IASB Image

Jun 25, 2020

On June 25, 2020, the International Accounting Standards Board (IASB) issued 'Amend­ments to IFRS 17' to address concerns and im­ple­men­ta­tion chal­lenges that were iden­ti­fied after IFRS 17 'Insurance Contracts' was published in 2017. The amend­ments are effective for annual periods beginning on or after January 1, 2023 with earlier ap­pli­ca­tion permitted. The IASB has also published 'Extension of the Temporary Exemption from Applying IFRS 9 (Amend­ments to IFRS 4)' to defer the fixed expiry date of the amendment also to annual periods beginning on or after January 1, 2023.

Back­ground

Since IFRS 17 Insurance Contracts was issued in May 2017, the Board has been mon­i­tor­ing the im­ple­men­ta­tion and has learned about concerns and im­ple­men­ta­tion chal­lenges. The Board had pre­vi­ously indicated that it would consider whether ad­di­tional action is needed to address matters arising during im­ple­men­ta­tion. At the October 2018 meeting of the Board a list of 25 potential amend­ments to the standard was iden­ti­fied and the criteria against which any possible amendment would be con­sid­ered were agreed. An Exposure Draft of proposed amend­ments was published on June 26, 2019 with comments requested by September 25, 2019.

In the re­de­lib­er­a­tions in the project on possible amend­ments to IFRS 17 following the end of the comment period, the IASB refined its proposals and took ad­di­tional feedback by con­stituents on board resulting in the final amend­ments issued today.

Changes

The main changes resulting from Amend­ments to IFRS 17 and Extension of the Temporary Exemption from Applying IFRS 9 (Amend­ments to IFRS 4) are:

  • Deferral of the date of initial ap­pli­ca­tion of IFRS 17 by two years to annual periods beginning on or after January 1, 2023 and change the fixed expiry date for the temporary exemption in IFRS 4 Insurance Contractsfrom applying IFRS 9 Financial In­stru­ments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after January 1, 2023.
  • Ad­di­tional scope exclusion for credit card contracts and similar contracts that provide insurance coverage as well as optional scope exclusion for loan contracts that transfer sig­nif­i­cant insurance risk.
  • Recog­ni­tion of insurance ac­qui­si­tion cash flows relating to expected contract renewals, including tran­si­tion pro­vi­sions and guidance for insurance ac­qui­si­tion cash flows recog­nized in a business acquired in a business com­bi­na­tion.
  • Clar­i­fi­ca­tion of the ap­pli­ca­tion of IFRS 17 in interim financial state­ments allowing an accounting policy choice at a reporting entity level.
  • Clar­i­fi­ca­tion of the ap­pli­ca­tion of con­trac­tual service margin (CSM) at­trib­ut­able to in­vest­ment-re­turn service and in­vest­ment-re­lated service and changes to the cor­re­spond­ing dis­clo­sure re­quire­ments.
  • Extension of the risk mit­i­ga­tion option to include rein­sur­ance contracts held and non-fi­nan­cial de­riv­a­tives.
  • Amend­ments to require an entity that at initial recog­ni­tion recog­nizes losses on onerous insurance contracts issued to also recognize a gain on rein­sur­ance contracts held.
  • Sim­pli­fied pre­sen­ta­tion of insurance contracts in the statement of financial position so that entities would present insurance contract assets and li­a­bil­i­ties in the statement of financial position de­ter­mined using port­fo­lios of insurance contracts rather than groups of insurance contracts.
  • Ad­di­tional tran­si­tion relief for business com­bi­na­tions and ad­di­tional tran­si­tion relief for the date of ap­pli­ca­tion of the risk mit­i­ga­tion option and the use of the fair value tran­si­tion approach.
  • Several small amend­ments regarding minor ap­pli­ca­tion issues.

Although the IASB had in its dis­cus­sions leading up to the Exposure Draft voted unan­i­mously to leave the annual cohort re­quire­ment in IFRS 17 unchanged and did not ask a question on it in the draft, some re­spon­dents commented on the IASB’s decision to retain the re­quire­ments unchanged. The IASB, therefore, included in its de­lib­er­a­tions the question of annual cohorts in February 2020 once more. However, it came to the same con­clu­sion as before and decided to retain, unchanged, the annual cohort re­quire­ment in IFRS 17.

Effective date and tran­si­tion

The amend­ments to IFRS 17 are effective for annual periods beginning on or after January 1, 2023. Earlier ap­pli­ca­tion is permitted. They are applied ret­ro­spec­tively.

Extension of the Temporary Exemption from Applying IFRS 9 (Amend­ments to IFRS 4) defers the fixed expiry date of the amendment to annual periods beginning on or after January 1, 2023. 

Ad­di­tional in­for­ma­tion

Please click for:

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.