ESMA opposes IFRS 9 deferral for insurance companies

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29 Jun 2015

The European Securities and Markets Authority (ESMA) has responded to the EFRAG draft endorsement advice on IFRS 9 'Financial Instruments'.

In its response to the draft endorsement advice published in May 2015, ESMA agrees with the conclusion that adoption of IFRS 9 is conducive to the European public good and should be adopted for the use in the European Union in a timely manner "in order to respond to the concerns raised during the financial crisis".

In one point, however, ESMA diagrees with EFRAG: the potential deferral of IFRS 9 for insurance business activities while the IASB finalises its forthcoming insurance standard. The letter states:

ESMA is of the view that in light of significant uncertainty about the timing of the finalisation of the new standard on insurance contracts, there should be no delay in the application of IFRS 9 for insurance industry. Furthermore, ESMA is of the view that EFRAG should explicitly acknowledge that the IASB already considered and tentatively rejected deferring the mandatory effective date of IFRS 9 for entities that issue insurance contracts in January 2015.

ESMA believes that deferral of IFRS 9 for insurance companies would be inconsistent with the generic nature of IFRSs that apply across all industries. ESMA also fears a lack of comparability, confusion among financial statement users, potential earnings management, a loss of credibility of financial reporting, conceptual repercussions and other unintended consequences.

Please click to access the full comment letter on the ESMA website.

In a recent comment letter, the Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) had supported a deferral.

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