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Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts [Completed]

Effective date:

An entity would apply the overlay approach retrospectively to qualifying financial assets when it first applies IFRS 9.

An entity would apply the deferral approach for annual periods beginning on or after January 1, 2018. The deferral can only be use for the three years following January 1, 2018.

At its meeting on November 14, 2018, the IASB tentatively decided to extend the use of the deferral approach to IFRS 9 for a further year, so that insurance entities would only be required to apply IFRS 9 for annual periods beginning on or after January 1, 2022.

Last updated:

November 2018

Overview

The IASB consulted on a package of temporary measures to address concerns about issues arising from implementing IFRS 9, Financial Instruments, before the new insurance contracts Standard comes into effect. IFRS 9 was issued in July 2014 and has an effective date of January 1, 2018. At that time, the IASB said it would consider potential challenges arising if IFRS 9 is implemented before the new insurance contracts Standard.

In September 2016, the IASB published "Applying IFRS 9, Financial Instruments with IFRS 4, Insurance Contracts" (Amendments to IFRS 4). The amendments provide two options for entities that issue insurance contracts within the scope of IFRS 4:

  • an option that permits entities to reclassify, from profit or loss to other comprehensive income, some of the income or expenses arising from designated financial assets (the "overlay approach");
  •  
  • an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4 (the "deferral approach").

The application of both approaches is optional and an entity is permitted to stop applying them before the new insurance contracts standard is applied.

The insurance contracts standard is currently being deliberated by the IASB and a final Standard is expected to be issued in 2016.

 

Other developments

December 2016

On December 19, 2016, the Office of the Superintendent of Financial Institutions (OSFI) issued the Draft Advisory: Deferral of IFRS 9 Application for Federally Regulated Life Insurers for consultation. The Advisory is in response to the September 2016 IASB approved amendment to the IFRS 4, Insurance Contracts allowing companies whose activities are predominately connected with insurance to defer the application of IFRS 9, Financial Instruments before January 1, 2021.

September 2016

On September 12, 2016, the IASB published "Applying IFRS 9, Financial Instruments with IFRS 4, Insurance Contracts". The amendments are intended to address concerns about the different effective dates of IFRS 9 and the forthcoming new insurance contracts standard (expected as IFRS 17 within the next six months).

April 2016

On April 19, 2016, the IASB voted in favour of the staff recommendations in connection with the redeliberation of the proposals around the application of IFRS 4 together with IFRS 9. There was a clear majority for supporting the staff's recommendations. Of the 13 board members that were present, only one board member voted against all staff recommendations. Another board member voted for most of the staff recommendations, but against the recommendations around disclosures. There were some comments from board members that will lead to changes, however, these comments were mainly directed towards easier application. Thus, the approaches proposed in the Exposure Draft “Amendments to IFRS 4: Applying IFRS 9, Financial Instruments with IFRS 4, Insurance Contracts” (overlay approach and deferral approach) have been essentially reconfirmed.

January 2016

On January 12, 2016, the AcSB issued an Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Stakeholders are encouraged to submit their comments by February 8, 2016.

December 2015

On December 9, 2015, the IASB published an exposure draft (ED/2015/11) with proposed amendments to IFRS 4, Insurance Contracts that are intended to address concerns about the different effective dates of IFRS 9, Financial Instruments and the forthcoming new insurance contracts standard. Comments are requested by February 8, 2016. The amendments proposed in ED/2015/11, Applying IFRS 9, Financial Instruments with IFRS 4, Insurance Contracts (Proposed amendments to IFRS 4) are intended to provide two options for entities that issue insurance contracts within the scope of IFRS 4: (i) an option that would permit entities to reclassify, from profit or loss to other comprehensive income, some of the income or expenses arising from designated financial assets; this is the so-called overlay approach; and (ii) an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4; this is the so-called deferral approach.

October 2015

On October 2, 2015, the IASB released an agenda paper in advance of its next meeting, to be held October 19-22, 2015. In this paper, the IASB staff explains expected timetable for finalizing potential amendments to IFRS 4, Insurance Contracts, that would address the interaction between IFRS 9, Financial Instruments, and the forthcoming standard on accounting for insurance contracts. It also recommends a 60-day comment period for the corresponding exposure draft.

September 2015

On September 23, 2015, the IASB confirmed measures that would amend IFRS 4, Insurance Contracts, to give companies whose business model is to predominantly issue insurance contracts the option to defer the effective date of IFRS 9, Financial Instruments, until 2021.

 

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