Highlights on Insurance Contracts
At the February 2017 meeting, the IASB voted on a number of sweep issues relating to the proposed insurance contracts standard (the ‘draft Standard’ or ‘IFRS 17’).
The IASB decided to recognise against the contractual service margin (CSM) all changes in estimates of future cash flows arising from non-financial risks under the general model as well as those arising from non-financial risks (and not relating to the underlying items) under the variable fee approach (VFA).
Für das IASB Board Meeting am 22. und 23. Februar 2017 empfiehlt das IASB Staff weitere Änderungen an der aktuellen Entwurfsfassung von IFRS 17, insbesondere in Bezug auf das Unlocking der CSM sowie die Anforderungen an die Gruppenbildung von Versicherungsverträgen.
Die Agenda Papiere fassen die Erkenntnisse aus der externen redaktionellen Durchsicht (external editorial review) des aktuellen Entwurfs von IFRS 17 zusammen – dem „second pre-ballot draft of IFRS 17“ – und beinhalten folgende Aspekte:
On 12 September 2016, the International Accounting Standards Board (IASB) published an amendment to IFRS 4, ‘Insurance contracts’. This addresses the concerns of insurance companies about the different effective dates of IFRS 9, ‘Financial instruments’, and the forthcoming new insurance contracts standard. The amendment to IFRS 4 provides two different solutions for insurance companies: a temporary exemption from IFRS 9 for entities that meet specific requirements (applied at the reporting entity level); and the ‘overlay approach’. Both approaches are optional.
IFRS 9 temporary exemption: aligning the scope for fair value disclosures with that for credit risk disclosures
Highlights from the IASB Meeting on 18 July 2016
At the July 2016 meeting the IASB voted on a sweep issue relating to the amendments to IFRS 4 Insurance Contracts (IFRS 4), Applying IFRS 9 Financial Instruments (IFRS 9) with IFRS 4.
All Board members voted in favour of an amendment to the previously made tentative decision about the scope of fair value disclosures when an entity applies the temporary exemption from IFRS 9. Under the revised decision, an entity would disclose the fair value at the end of the reporting period and the change in the fair value during the reporting period for the following two groups of financial assets separately:
Highlights from the IASB meeting on 17 May 2016
At the May 2016 meeting the IASB unanimously agreed to grant the Staff permission to begin the balloting process for the proposed amendments to IFRS 4 Insurance Contracts (IFRS 4), Applying IFRS 9 Financial Instruments (IFRS 9) with IFRS 4. One IASB member intends to dissent from the publication of the amendments because she believes that the temporary exemption results in a significant loss of information compare to application of IFRS 9 and that the overlay approach was sufficient to address concerns raised by preparers. The Board expects to issue final amendments to IFRS 4 in September 2016.
At the meeting on 19 April 2016 the IASB continued its deliberations of the proposed amendments to IFRS 4 Insurance Contracts (IFRS 4), Applying IFRS 9 Financial Instruments (IFRS 9) with IFRS 4.
The Board decided to revise the eligibility criteria for meeting the temporary exemption from applying IFRS 9 (‘the temporary exemption’), which is expected to expand the population of entities eligible for it. The Board also changed the assessment date for eligibility to an earlier period than the initial application date of IFRS 9.
The Board also made decisions relating to application, presentation and disclosure of the overlay approach, disclosures relating to the application of the temporary exemption, and disclosure of other information when the temporary exemption is applied.
At the March meeting the IASB discussed the proposed amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts. The Staff summarised the results from its comment letter analysis and outreach, including feedback received from users of financial statements. The Board also made a number of key decisions that set the direction for its redeliberations of the proposed amendments to IFRS 4 including the following decisions to confirm that:
- the eligibility assessment for the temporary exemption is performed at ‘the reporting entity level’ only;
- there should be a temporary exemption and an overlay approach and that both approaches should be optional; and
At the meeting on 16 February 2016 the IASB unanimously agreed to grant the staff permission to begin the balloting process for the forthcoming new insurance contracts standard (the ‘Standard’). None of the IASB members intends to dissent from the publication of the Standard.
The Chairman indicated that drafting of the Standard may take nine months so the Standard is expected to be issued around the end of 2016. During the drafting of the Standard the IASB plans to issue progress reports highlighting difficult issues.
The Board also plans to issue educational materials on key issues such as the scope of the variable fee approach and use of discretion.
The IASB will consider the need for future Board discussion of issues that may arise during the drafting process. The Board is expected to decide on the mandatory effective date of the Standard when the publication date is more certain.
The IASB met on 19 and 20 January 2016 to discuss the level of aggregation of contracts for allocation of the contractual service margin (CSM) and losses from onerous contracts. They also discussed the definition of discretion in the context of participating contracts that follow the general model.
In December 2015 the IASB issued an Exposure Draft (ED/2015/11) to amend IFRS 4: Insurance Contracts (IFRS 4) to address the accounting consequences arising from the application of IFRS 9 Financial Instruments (IFRS 9) prior to the application of the new insurance contracts Standard. The IASB has proposed two potential solutions to address the financial and operational concerns of the affected entities: a temporary exemption from applying IFRS 9 and the Overlay Approach.
Temporary exemption from applying IFRS 9