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IASB proposes narrow-scope amendment to IFRS 17

  • IFRS - IASB Image

Jul 28, 2021

On July 28, 2021, the International Accounting Standards Board (IASB) has published the exposure draft "Initial Application of IFRS 17 and IFRS 9 — Comparative Information (Proposed amendment to IFRS 17)" that would enable companies to improve the usefulness of the comparative information presented on initial application of IFRS 17 and IFRS 9. The deadline for submitting comments is September 27, 2021.

 

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.

 

Key proposal

The main proposal in ED/2021/8 Initial Application of IFRS 17 and IFRS 9 — Comparative Information (Proposed amendment to IFRS 17) is a proposed 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 proposed amendment, an entity would be 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. There are no proposed changes to the transition requirements in IFRS 9.

The deadline for submitting comments on these proposals is September 27, 2021.

 

Effective date

The exposure draft proposes that an entity that elects to apply the amendment shall apply it when it applies IFRS 17.

 

Additional information

 

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