IAS 39/IFRS 4 – Financial guarantee contracts and credit insurance


Financial guarantee contracts (sometimes known as ‘credit insurance’) require the issuer to make specified payments to reimburse the holder for a loss it incurs if a specified debtor fails to make payment when due under the original or modified terms of a debt instrument. These contracts can have various legal forms, such as that of a financial guarantee, letter of credit, credit default contract or insurance contract. Some financial guarantee contracts result in the transfer of significant insurance risk and thus meet the definition of ‘insurance contract’ in IFRS 4 Insurance Contracts.

Mindful of the need to develop a ‘stable platform’ of Standards for 2005, the Board decided to finalise IFRS 4 without specifying the accounting for these contracts and to subsequently develop separate proposals on this aspect.  As part of finalising IFRS 4, the IASB also decided:

  • If a financial guarantee contract is not an insurance contract, as defined in IFRS 4, it should be within the scope of IAS 39 Financial Instruments: Recognition and Measurement
  • If a financial guarantee contract was entered into or retained on transferring to another party financial assets or financial liabilities within the scope of IAS 39, the issuer should apply IAS 39 to that contract even if the contract is an insurance contract, as defined in IFRS 4.

This project page discusses the development and finalisation of these additional proposals.


Current status of the project

This project has been completed. The IASB issued Financial Guarantee Contracts (Amendments to IAS 39 and IFRS 4) on 18 August 2005.


Project milestones

8 July 2004 Exposure Draft Financial Guarantee Contracts and Credit Insurance published Comment deadline 8 October 2004
18 August 2005 Financial Guarantee Contracts (Amendments to IAS 39 and IFRS 4) issued Effective for annual periods beginning on or after 1 January 2006

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.