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:

• IASB press release (link to IASB website)
• IASB webcast about the amend­ments to IFRS 17 (link to IASB website)
• Project summary and feedback statement on the IASB website