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IASB finalizes narrow-scope amendment to IFRS 17

  • IFRS - IASB Image

Dec 09, 2021

On December 9, 2021, the International Accounting Standards Board (IASB) has published "Initial Application of IFRS 17 and IFRS 9 — Comparative Information (Amendment to IFRS 17)" with an amendment that enables companies to improve the usefulness of the comparative information presented on initial application of IFRS 17 and IFRS 9.

 

Background

Many insurance companies have not yet applied IFRS 9, Financial Instruments and will first apply it at the same time they apply IFRS 17, Insurance Contracts. However, the two standards have different requirements for the comparative information that will be presented on initial application. IFRS 17 requires companies to present one restated comparative period. IFRS 9 permits but does not require restatement of comparative periods, and prohibits companies from applying IFRS 9 to financial assets derecognized in the comparative period.

Some insurers have since raised concerns about the usefulness of the information that would be presented for financial assets in the comparative period on initial application of IFRS 17. They are of the view that such information would be misleading because it would include accounting mismatches that would essentially arise from the continued application of IAS 39 (i.e. would not represent economic mismatches), which would be very difficult to explain. These insurers asked the Board to allow them to present significantly improved information about financial instruments that would result from applying the classification requirements of IFRS 9 at the transition date of IFRS 17.

In July 2021, the IASB published proposed amendments to IFRS 17 to address these concerns and the amendments have now been finalized.

 

Key amendment

The main amendment in Initial Application of IFRS 17 and IFRS 9 — Comparative Information (Amendment to IFRS 17) is a narrow-scope amendment to the transition requirements of IFRS 17 for entities that first apply IFRS 17 and IFRS 9 at the same time. The amendment regards financial assets for which comparative information is presented on initial application of IFRS 17 and IFRS 9, but where this information has not been restated for IFRS 9. Under the amendment, an entity is permitted to present comparative information about a financial asset as if the classification and measurement requirements of IFRS 9 had been applied to that financial asset before. The option is available on an instrument-by-instrument basis. In applying the classification overlay to a financial asset, an entity is not required to apply the impairment requirements of IFRS 9.

There are no changes to the transition requirements in IFRS 9.

 

Effective date

An entity that elects to apply the amendment applies it when it first applies IFRS 17.

 

Additional information

 

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