We comment on the IASB’s proposed amendments to IFRS 4

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08 Feb 2016

We have responded to the IASB's Exposure Draft, 'Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Proposed amendments to IFRS 4)', that was IASB published in December 2015.

As stated in the comment letter, we agree:

  • The exposure draft has identified valid reasons to introduce a temporary solution to issues arising from transitioning to two major and interrelated new standards at different times.
  • An option to defer IFRS 9 should be available for insurance activities and that a predominance criterion based on the carrying amount of liabilities is appropriate means to determine when that option should be available. However, we have concerns over the methodology for measuring that criterion and also disagree that it should be assessed only at the reporting entity level.
  • The proposed expiry date for the deferral approach is appropriate, but recommend that the IASB conclude its deliberations on the new insurance contracts standard taking into account the inputs received from comment letters and outreach activities, so that the effective date of the new standard is within this timescale.

In addition, we do not believe that a clearly defined insurance business should be excluded from the deferral approach only because it is part of a larger group and recommend the predominance test be permitted at the reporting entity level or each level below the parent entity (“waterfall” approach). Further, we provided some suggestions on how the predominance test could be modified to ensure that the temporary deferral can be applied by an appropriate population of entities.

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