EFRAG draft comment letter on proposed amendments to address concerns about the different effective dates of IFRS 9 and the new insurance contracts standard

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

24 Dec 2015

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB exposure draft ED/2015/11 'Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Proposed amendments to IFRS 4)'.

EFRAG welcomes the IASB proposals. EFRAG believes that the temporary exemption from applying IFRS 9 addresses all the concerns relating to the misalignment of IFRS 9 and the new insurance contracts standard, while the overlay approach would only address the accounting mismatches. Nevertheless, EFRAG supports both approaches as complementary solutions.

While EFRAG believes the temporary exemption to address all concerns, EFRAG is also convinced that the exemption should be available to all entities that issue material insurance contracts within the scope of IFRS 4 in order to avoid an uneven playing field in the insurance sector. As the exemption should not capture material non-insurance activities, EFRAG is of the opinion that it should be available both at and below the reporting entity level. In order to achieve this, EFRAG suggests to base the exemption on one of the following approaches:

  • A widened ‘predominant activity’ criterion which is determined on a basis that is not limited to the issuance of contracts within the scope of IFRS 4. However, it would be set at a higher threshold than proposed by the IASB; or
  • A ‘regulated entity’ criterion which considers definitions from regulatory sources.

Finally, EFRAG agrees with the expiry date set for the temporary exemption from applying IFRS 9.

Comments on EFRAG's draft comment letter are requested by 20 January 2016. For more information, see the press release and the draft comment letter on the EFRAG website.

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