In its March meeting, the EFRAG TEG members continued deliberation on the content to be included in its draft endorsement advice for IFRS 17.
The March meeting focused on IFRS 17 and mutual entities, the IASB’s amendments to IFRS 17 from its February/March meetings and the questions included in the EFRAG’s case study on the IFRS 17 implementation impacts that will be carried out over the next two months.
- IFRS 17 and mutual insurance entities (Link to Agenda paper 04-02)
With this topic, EFRAG responds to the questions of the European Commission and the European Parliament in respect of the interaction between IFRS 17 and Mutual insurance entities.
Accordingly, the EFRAG Secretariat assessed the IFRS 17 requirements for Mutual insurance entities applying the endorsement criteria in the IAS Regulation, focusing on those topics where the characteristics of a Mutual, in particular in respect of recognition and measurement of insurance liabilities, should justify a different approach for Mutual insurance entities than for other insurers.
The analysis was performed in terms of relevance, reliability, understandability and prudence and as a result, EFRAG Secretariat recommended no further activities in respect of Mutual insurance entities.
It will be further discussed if and how this paper will be included in the draft endorsement advice.
- Limited update on the case study – IFRS 17 implementation impacts (Link to Agenda paper 04-03)
After the EFRAG’s extensive case study on IFRS 17 Insurance Contracts (conducted between December 2017 and June 2018) and EFRAG’s simplified case study ( conducted between February and May 2018), the EFRAG plans a further case study with the questions that take into account all the IASB decisions, including March 2020. The updated case study is open to all interested participants and is not limited to only those who performed the extensive and simplified case studies.
This update to the EFRAG case study aims:
- to assess to which extent the result of the Amendments to IFRS 17 and further changes following the tentative decisions have reduced the concerns raised in relation to IFRS 17 as issued;
- obtain more updated information on the implementation costs; and
- obtain information on the intention to early adopt the standard in 2022.
EFRAG Secretariat is seeking input on this updated version by the 15th of April 2020 for all topics except costs and benefits and by 15th of May 2020 for costs and benefits questions.
- IASB staff papers March 2020 (Link to Agenda paper 04-07)
EFRAG TEG members discussed the changes to paragraph B107 of IFRS 17 Issues Paper which says that the entity shall assess the variability in the amounts in paragraphs B101(b) and B101(c) over the duration of the insurance contract instead of the group of insurance contracts.
In its comment letter, EFRAG stated that there are concerns with the assessment being done at individual contract level rather than at groups of contracts as this would be inconsistent with the unit of account for IFRS 17 measurement and would unduly disrupt the implementation projects and therefore significantly increase costs.
EFRAG TEG members were asked if this issue warrant inclusion in the EFRAG draft endorsement advice.
The members agreed that they need to be very careful in addressing the issue in the draft endorsement advice in order not to overemphasis the relevance of the issue.
The agenda papers that were not discussed during the meeting are as follows:
- Hedge accounting in the context of IFRS 17 – lessons learnt (Link to Agenda paper 04-04)
- IFRS 17 and IFRS 9 (Link to Agenda paper 04-05)
As a result of this meeting, no topics have been added to the draft endorsement advice. It will be further discussed if the topics: IFRS 17 and mutual insurance entities and the changes in the paragraph B107 will be included in the draft endorsement advice.
EFRAG TEG will continue to discuss on the content to be included in the draft endorsement advice for IFRS 17 during the next meetings. Next meeting is planned for the 16th of April.
For an overview of topics already included in the draft endorsement advice, please refer to Link.