May 2017 IASB meeting notes posted

18 May 2017

The IASB met at its offices in London on 16–17 May 2017. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting. The meeting had only one decision making session, on implementation issues. All of the other sessions were non-decision making education sessions.

The meeting started with a session on dynamic risk management. The staff explained to the Board how net interest margin is managed, and the related financial reporting implications.

This was followed by a session on rate-regulated activities, focusing on the characteristics of the supplementary rights and obligations created by rate adjustment mechanisms.

The afternoon session focused on implementation issues. The IASB ratified an Interpretation Uncertainty over Income Tax Treatments. The Board also decided to proceed with amendments to IAS 28 Investments in Associates and Joint Ventures to clarify that IFRS 9 applies to long-term interests in such investments. The proposal was included in the Exposure Draft Annual Improvements to IFRS Standards 2015–2017 Cycle published in January 2017.

They completed the day with updates on the implementation of IFRS 16 Leases and the research programme.

On Wednesday, the Board discussed goodwill and impairment and ways to simplify the impairment test.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

IASB issues new insurance contracts standard

18 May 2017

The International Accounting Standards Board (IASB) has published a new standard, IFRS 17 'Insurance contracts'. The new standard requires insurance liabilities to be measured at a current fulfillment value and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17 supersedes IFRS 4 'Insurance Contracts' and related interpretations and is effective for periods beginning on or after 1 January 2021, with earlier adoption permitted if both IFRS 15 'Revenue from Contracts with Customers' and IFRS 9 'Financial Instruments' have also been applied.



This project began as an IASB project to undertake a comprehensive review of accounting for insurance contracts when the IASB added the project to its agenda in September 2001, taking over the equivalent project started in April 1997 by the IASB's predecessor body. During the past 16 years of development, the project was better known as "IFRS 4 Phase II".

The IASB's objective was to develop a common, high-quality standard that will address recognition, measurement, presentation and disclosure requirements for insurance contracts. In February 2014, the FASB tentatively decided to abandon its convergence work with the IASB on insurance contracts that they had started in October 2008. Instead, the FASB decided to focus its future efforts on making targeted improvements to the existing U.S. GAAP insurance accounting model.

The IASB issued a discussion paper in 2007 and the first exposure draft ED/2010/8 Insurance Contracts in July 2010. A second targeted revised exposure draft ED/2013/7 Insurance Contracts was published on 20 June 2013. The IASB finalised its deliberations in February 2016 and made the last set of amendments in February 2017 as a result of the field test activities conducted during the summer of 2016.



An entity shall apply IFRS 17 Insurance Contracts to:

  • Insurance and reinsurance contracts that it issues;
  • Reinsurance contracts it holds; and
  • Investment contracts with discretionary participation features (“DPF”) it issues, provided it also issues insurance contracts.

Scope changes from IFRS 4

  • The requirement, that in order to apply the insurance standard to investment contracts with DPF, an entity has to also issue insurance contracts.
  • An option to apply IFRS 15 Revenue from Contracts with Customers to fixed-fee contracts, provided certain criteria are met.


Level of aggregation

IFRS 17 requires entities to identify portfolios of insurance contracts, which comprises contracts that are subject to similar risks and are managed together. Each portfolio of insurance contracts issued shall be divided into a minimum of three groups:

  • A group of contracts that are onerous at initial recognition, if any;
  • A group of contracts that at initial recognition have no significant possibility of becoming onerous subsequently, if any; and
  • A group of the remaining contracts in the portfolio, if any.

An entity is not permitted to include contracts issued more than one year apart in the same group. Furthermore, if a portfolio would fall into different groups only because law or regulation constrains the entity's practical ability to set a different price or level of benefits for policyholders with different characteristics, the entity may include those contracts in the same group.


Overview of the new accounting model

The standard measures insurance contracts either under the general model or a simplified version of this called the Premium Allocation Approach. The general model is defined such that at initial recognition an entity shall measure a group of contracts at the total of (a) the amount of fulfilment cash flows (“FCF”), which comprise probability-weighted estimates of future cash flows, an adjustment to reflect the time value of money (“TVM”) and the financial risks associated with those future cash flows and a risk adjustment for non-financial risk; and (b) the contractual service margin (“CSM”).

On subsequent measurement, the carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims. The liability for remaining coverage comprises the FCF related to future services and the CSM of the group at that date. The liability for incurred claims is measured as the FCF related to past services allocated to the group at that date.

An entity may simplify the measurement of the liability for remaining coverage of a group of insurance contracts using the premium allocation approach on the condition that, at initial recognition, the entity reasonably expects that doing so would produce a reasonable approximation of the general model, or the coverage period of each contract in the group is one year or less.


Presentation in the statement of financial performance

An entity shall disaggregate the amounts recognised in the statement(s) of financial performance into an insurance service result, comprising insurance revenue and insurance service expenses, and insurance finance income or expenses. Income or expenses from reinsurance contracts held shall be presented separately from the expenses or income from insurance contracts issued.

An entity shall present in profit or loss revenue arising from the groups of insurance contracts issued, and insurance service expenses arising from a group of insurance contracts it issues, comprising incurred claims and other incurred insurance service expenses. Revenue and insurance service expenses shall exclude any investment components.


Effective date

IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2021. Earlier application is permitted if both IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments have also been applied.



An entity shall apply the standard retrospectively unless impracticable, in which case entities have the option of using either the modified retrospective approach or the fair value approach.

At the date of initial application of the standard, those entities already applying IFRS 9 may retrospectively re-designate and reclassify financial assets held in respect of activities connected with contracts within the scope of the standard.


Additional information

IASB website

IAS Plus

Other updated information

The Bruce Column — Comparability is the goal of the new insurance standard

18 May 2017

It has been years in the making, but a new insurance standard is now published. And as our resident columnist Robert Bruce explains it should shed light on the financial results of a sector which was previously hard to understand.

The world of insurance has always been a difficult one for financial reporting. People talked of patchwork quilts and of black boxes. No one could quite see the proper picture, and comparability was difficult. All this dated back to the dawn of time, or at least twenty years ago. Everything had been stitched together or grandfathered into what was IFRS 4. Now we have IFRS 17. And as from accounting periods starting from 1 January 2021 that is what the industry, and investors, will have to deal with. Insurers will put old practices aside and apply the same rules and so this should be an aid to comparability. Whereas the old system was most definitely an obstacle to comparability.

Some have argued that investors have required a premium on their return, compared to investing in non-insurers, for the complexity of the insurance sector of which the financial reporting has not helped. Different national accounting practices have probably contributed to the premium demanded by international investors. A single set of rules should help reprice the premium. Complexity will remain of course; insurance is not a simple business given it relies on judging the future. And the degree of comparability will depend partly on the quality of the disclosures, of which there will be many. It is now not just about measurement on the balance sheet but the package of information, including disclosures, to enable investors to make informed investment choices.

It will be a big change to implement. 2021 sounds like some way away. But with the comparative figures in 2020 needing restatement it is not so far off. But early planning for what is to come will make life easier in the long-term. Rather like insurance.

Third ASBJ and EFRAG bilateral meeting

18 May 2017

Representatives of the European Financial Reporting Advisory Group (EFRAG) and the Accounting Standards Board of Japan (ASBJ) held a bilateral meeting in Tokyo on 17 and 18 May 2017. The EFRAG and ASBJ provided updates on their respective projects and exchanged views on the opportunities for cooperation.

EFRAG and ASBJ discussed the following topics:

  • Goodwill,
  • Rate-regulated activities,
  • Negative interest rates,
  • Insurance contracts, and
  • the IASB’s better communication project.

The next meeting between the EFRAG and ASBJ will be held in Brussels in 2018. A press release is available on the ASBJ website.

IFRS conference in Kuala Lumpur

17 May 2017

The IFRS Foundation, along with the Malaysian Accounting Standards Board (MASB), has announced an IFRS conference in Kuala Lumpur, Malaysia, on 8 September 2017.

The conference will focus on IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases and on practical implementation issues and challenges of these new standards.

For more information and registration, see the conference page on the IASB’s website.

IASB posts webcast on IFRS 9

16 May 2017

The IASB staff has made available a webcast discussing IFRS 9 and the application of the impairment requirements for revolving facilities.

In the webcast, IASB Vice-Chair Sue Lloyd and Technical Director Kumar Dasgupta talk through key requirements of IFRS 9 Financial Instruments that are relevant when an entity determines the expected life of revolving facilities, such as credit cards and overdrafts, by considering its normal credit risk management actions.

The webcast is available on the IASB’s website.

IVSC consults on future agenda

16 May 2017

The International Valuation Standards Council (IVSC) has launched a consultation to gain feedback on the topics that IVSC should address as part of its current agenda and additional topics that stakeholders think should be priorities or added to IVSC’s agenda.

Major valuation topics identified in the consultation paper as potential IVSC projects include non-financial liabilities, discount rates, early stage valuation, biological assets, extractive industries, and inventory. The IVSC also thinks that targeted improvements might make sense as regards control premium and discount for lack of control, capital structure considerations, and development value. The consultation paper also indentifies certain topics for potential future projects that the IVSC believes represent medium to longer terms goals of IVSC and are not priorities.

Please click to access the consultation paper on the IVSC website. Comments are requested by 15 August 2017.

IASB announces IFRS 17 release date

15 May 2017

The IASB has announced that it expects to publish its insurance contracts standard, IFRS 17, on 18 May 2017. In addition, the IASB expects to publish a proposed IFRS taxonomy update on insurance contracts and host two live web presentations on the standard.

The web presentations will provide an overview of the new requirements and will allow participants to ask questions. Registration is required (on the IASB's website) for the 18 May web presentations:

Stay tuned to IAS Plus for in­for­ma­tion on IFRS 17; we will have timely, com­pre­hen­sive coverage of the new insurance contracts standard to help readers un­der­stand the re­quire­ments and im­pli­ca­tions.

IFRS Foundation and World Bank enter Memorandum of Understanding

15 May 2017

IFRS Foundation and World Bank have decided to deepen their cooperation to support developing economies in their use of reporting standards.

Both organisations have a public interest mission and they believe that combining their expertise and extensive networks will support developing economies to achieve sustainable and comprehensive development built on transparency, accountability, and efficient financial markets.

The Memorandum of Understanding notes three priorities of collaboration:

  • Implementation of IFRSs and the IFRS for SMEs by encouraging adoption, supporting accessibility, and conducting research;
  • Capacity development for the implementation of IFRSs by developing scalable programmes, supporting professional development, and thought leadership; and
  • Enhancing engagement in standards development by strengthening standard-setting capabilities and participating in advisory bodies of the IFRS Foundation.

Please click to access the following information of the IASB website:

EBA publishes final guidance on accounting for expected credit losses

15 May 2017

The European Banking Authority (EBA) has finalised its guidelines on credit institutions' credit risk management practices and accounting for expected credit losses.

The EBA guidelines build on the guidance by the Basel Committee on Banking Supervision (BCBS) in December 2015 on the same matter and feature a detailed section on the application of IFRS 9 Financial Instruments. A draft of the guidelines was subject to a three-month consultation period between July 2016 and October 2016. The guidance notes:

The EBA welcomes the move from an incurred loss model to an ECL model under IFRS 9. IFRS 9 is, overall, an improvement compared to IAS 39 in the accounting for financial instruments and the changes on credit loss provisioning should contribute in addressing the G20’s concerns about the issue of ‘too little, too late’ recognition of credit losses and improve the accounting recognition of loan loss provisions by incorporating a broader range of credit information. IFRS 9 is therefore expected to address some prudential concerns and contribute to financial stability. However, the application of IFRS 9 also requires the use of judgement in the ECL assessment and measurement process which could potentially affect the consistent application of IFRS 9 across credit institutions and the comparability of credit institutions’ financial statements.

The EBA notes that the objective of the guidelines is to be in line with the BCBS guidance. The EBA guidelines would also not prevent credit institutions from meeting the impairment requirements in IFRS 9. The guidelines should be implemented by 1 January 2018.

Please click for the following additional information on the EBA website:

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