Amendments to IAS 39 and IFRS 4 – Financial Guarantees and Credit Insurance

Date recorded:

The purpose of the Board's discussion was to assess whether the Board should proceed, in general terms, with the proposals in the ED on Financial Guarantee Contracts and Credit Insurance.

On the balance of considerations arising from the comment letter analysis and the deliberations regarding Insurance Contracts (Phase II), the Staff recommended that the proposal be withdrawn. The Board discussed this issue at length and reached some consensus that this issue should be brought back to the Board at a later date, whilst in the interim, the Staff would work on a proposal along the following lines:

  • Clarify in the scope of IFRS 4 that financial guarantees are within the scope of IAS 39 whereas credit insurance contracts are dealt with in IFRS 4. This was generally viewed as providing a free choice as the 'labelling' of a contract could drive the accounting treatment.
  • The revised guidance in the exposure draft would be incorporated into IAS 39.
  • The IAS 39 scope paragraph would clarify that it applies to financial guarantees.
  • The loss adequacy test in IFRS 4 would apply to credit insurance contracts on the basis of IAS 37.

It was noted that the accounting outcome for both types of contracts (financial guarantees and credit insurance contracts) would be substantially the same, regardless of which option is chosen.

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