Ifrs in focus deloitte financial services industry. Reinsurance contract an insurance contract issued by one insurer the reinsurer to compensate another insurer the. Ifrs 4 background the iasb issued the first standard on insurance contracts in 2005. Efrags draft endorsement of applying ifrs 9 financial. Ifrs 17 supersedes ifrs 4 insurance contracts, an interim standard issued in 2004 that allows entities to use a wide variety of accounting practices for insurance contracts. New insurance contracts standard introducing ifrs 17 the new insurance contracts standard ifrs 17 brings fundamental changes to international insurance accounting. Insurance contracts, including reinsurance contracts, that an entity issues reinsurance contracts that an entity holds financial instruments issued with a discretionary participation features does not address accounting. The standard was published in march 2004 and is effective from 1 january 2005. Sep 14, 2017 ifrs 17 insurance contracts standard presentation to the efrag board. Ifrs 4 insurance contracts pwcs inform uk accounting topic. International financial reporting standard 4 insurance contracts.
Overview of ifrs 4 defines an insurance contract and focuses on types of contracts rather than types of entities applies to. Ifrs manual of accounting chapter 50, insurance contracts. The new standard brings both benefits and challenges for insurers, who will need to gain an understanding of the accounting changes and the impacts on their businesses. This international standard of actuarial practice isap provides guidance to. Ifrs 17 insurance contracts may 2017 downloadable pdf. Ifrs 17 was released in may 2017 and it is quite a complex standard. Ifrs 17, which replaces the existing mandate under ifrs 4, is an attempt to standardize. Note that ifrs 4 is an interim standard resulting from phase i of the boards active project on insurance contracts and is intended to apply only until the entity adopts ifrs 17. Reasons for issuing the standard in4 the previous ifrs standard on insurance contracts, ifrs 4, was an interim standard that allowed entities to use a wide variety of accounting practices for insurance contracts, reflecting national accounting requirements and variations of those requirements. The ifrs foundation is the organisation that develops international financial reporting standards, for the public interest. Ifrs 4 applies, with limited exceptions, to all insurance contracts including reinsurance contracts that an entity issues and to reinsurance contracts that it holds. In light of the iasbs comprehensive project on insurance contracts, the standard provides a temporary exemption from the requirements of some other ifrss, including the requirement to consider ias 8.
Applying ifrs 9 financial instruments with ifrs 4 insurance contracts, which provide two optional solutions. Ifrs 17 insurance contracts standard presentation to the efrag board mark fitzpatrick. Ifrs 4 profit reporting for south african life insurance. It will fundamentally change the accounting of all entities that issue insurance and investment contracts with discretionary participation features. Ifrs 4 is designed to make limited improvements to accounting practices and to provide users with an insight into the key areas that relate to accounting for insurance contracts. For the requirements reference must be made to international financial reporting standards. Does the contract meet the definition of an insurance contract under ifrs 4 phase ii. The extent of guidance in ifrs 4 is quite modest in comparison with the more comprehensive overhaul of insurance accounting that is envisaged by the iasb in the future. This presentation was made available to efrag teg as agenda paper 0505 for the meeting on 5 july 20181. Ifrs 17 replaces ifrs 4an interim standard that results in widely divergent practices ifrs 17 consistent accounting for all insurance contracts updated information about obligations, risks and performance of insurance. Ifrs 17 insurance contracts reinsurance issues paper efrag board meeting 23 april 2018 paper 0803, page 4 of 7 appendix ifrs 17 requirements about reinsurance reinsurance contracts held measurement 1 the requirements for primary insurance contracts are modified to reflect that i. Applying ifrs 9 financial instruments with ifrs 4 insurance contracts.
These illustrative examples accompany ifrs 17 insurance contracts issued may 2017. Essential to standardise reporting of insurance contracts ifrs 4 phase ii progress discussion paper issued in 2007 slow progress due to new iasb members, inclusion of. The standard replaces ifrs 4 insurance contracts an interim standard which does not particularly prescribe a measurement policy for insurance contracts. To the extent permitted by applicable law, the board and the ifrs foundation foundation expressly disclaim all liability howsoever arising from this publication or any. At its meeting on april 1921, 2016, the iasb continued its deliberations on the proposals in the ed applying ifrs 9 financial instruments ifrs 9 with ifrs 4 insurance contracts ifrs 4 and they tentatively decided. The cfo forum presented its members analysis of the key findingsconcerns from the case study to the efrag board on 3 july. Ifrs 4 international financial reporting standard 4 insurance contracts objective 1 the objective of this ifrs is to specify the financial reporting for insurance contracts by any entity that issues such contracts described in this ifrs as an insurer until the board completes the second phase of its project on insurance contracts.
Ifrs 4 insurance contracts the objective of this ifrs is to specify the financial reporting for insurance contracts by any entity that issues such contracts described in this ifrs as an insurer until the board completes the second phase of its project on insurance contracts. In response to comments received on the 20 revised exposure draft 20 ed. Bc1 the previous ifrs standard on insurance contracts, ifrs 4 insurance contracts, allowed entities to use a wide variety of accounting practices for insurance contracts, reflecting national accounting requirements and variations in those requirements. Efrags letter to the european commission regarding. Prudential groups longterm insurance business 4 total.
In this webinar martin edelmann and sue lloyd, members of the board, and joanna yeoh. Ifrs 17 in principle transfers all the requirements. Bridging the gap abstract the international accounting standards board iasb released its latest accounting standard, ifrs 17. Ifrs 9 financial instruments 2 insurance contracts and has used accounting that is applicable to insurance contracts, the issuer may elect to apply either this standard or ifrs 4 to such financial guarantee contracts. If you take a look at various insurance contracts around the world, you would find that they are accounted for using. The following are examples of contracts that are insurance contracts, if the transfer of insurance risk is significant. One solution is a temporary exemption from ifrs 9, effectively deferring its application for some insurers.
Ifrs 4 specifies some aspects of the financial reporting for insurance contracts by any entity that issues such contracts and has not yet applied ifrs 17. Page 1 of 37 efrags letter to the european commission regarding endorsement of applying ifrs 9 financial instruments with ifrs 4 insurance contracts. Ifrs 4 insurance contracts provides guidance on the accounting treatment of all insurance contracts except for specific contracts covered by other standards. Applying ifrs 9 financial instruments with ifrs 4 insurance contracts amendments to ifrs 4 transfers of investment property amendments to ias 40 14 ifrs 10 and ias 28 sale or contribution of assets between an investor and its associate or joint venture amendments to ifrs 10 and ias 28 14. Jan 12, 2018 executive ifrs workshop for regulators, 37 june 20, vienna presented by darrel scott, board member, iasb the cfrr and the international accounting standar. Appendix a includes a summary highlighting what is new and different in ifrs 17 compared to the disclosure requirements in ifrs 4. Ifrs 4 phase ii for insurance contracts deloitte belgium. Ifrs 4 phase ii objective is to deliver the first comprehensive ifrs on accounting for insurance contracts.
Unbundling is required if both the following conditions are met. Ifrs 17 insurance contracts standard presentation to the. Ifrs 4 insurance contracts applies, with limited exceptions, to all insurance contracts including reinsurance contracts that an entity issues and to reinsurance contracts that it holds. This paper summarises the responses received to the simplified case study on ifrs 17. Ifrs 4 permits an insurer to change its accounting policies for insurance contracts only if, as a result, its financial statements present information that is more relevant and no less reliable, or more reliable and no less relevant. Ifrs 4, insurance contracts free download pdf kupdf. Nevertheless, if an issuer of financial guarantee contracts has previously asserted explicitly that it regards such contracts as insurance contracts and. The iasb proposes to amend the mandatory effective date of ifrs 17, so that entities would be required to apply ifrs 17 for annual periods beginning on or after 1 january 2022 and change the fixed expiry date for the temporary exemption in ifrs 4 insurance contracts from. Ifrs 4 insurance contracts is an interim standard permits continuation of wide variety of practices includes a temporary exemption from general requirement that accounting policies should be relevant and reliable ifrs 4 does not provide transparent information about the effect of insurance contracts on financial statements. Ifrs 17 insurance contracts may 2017 comprises three booklets sold together as a set, including the standard, basis for conclusions and illustrative examples set isbn 9781911040545 3 booklets. More than 20 years in development, ifrs 17 represents a complete overhaul of accounting for insurance contracts.
Isap 4 international standard of actuarial practice 4 ifrs 17. Australia and must not be downloaded, reproduced or otherwise used without the. The pdf comprises three booklets sold together as a set, including the ifrs standard, basis for conclusions and illustrative examples. Prior to now, insurance accounting practices follow the provisions of the local gaap, sas 16 in nigeria and other applicable sorps in other jurisdictions, particularly, the association of british insurersabi sorps. Amendments to ifrs 4 olivier guersent director general, financial stability, financial services and capital markets union. Scoping through analysis of contracts ifrs insurance 101 1. Ifrs 17 is effective for annual reporting periods beginning on or after january 1, 2022. The international financial reporting standards foundation is a notforprofit corporation incorporated in the state of delaware, united states of america, with the delaware division of companies file no. Nz ifrs 4 insurance contracts forprofit specifies the financial reporting for insurance contracts issued by an entity and the financial reporting requirements for insurance activities. Ifrs 4 insurance contracts, an interim standard issued in 2004 that allows entities to use a wide variety of accounting practices for insurance contracts. Save for later this new accounting model is based on a transparent approach that uses current measures and accounts for profit as insurers fulfill their obligations towards their policyholders.
In light of the iasbs comprehensive project on insurance contracts, the standard provides a temporary exemption from the requirements of some other ifrss, including the requirement to consider ias 8 accounting policies. Ifrs standards are established in order to have a common accounting language, so business and accounts can be understood and compared from company to company and from country to country. Ifrs 4 does not apply to the following insurance contracts. Ifrs 4 international financial reporting standard 4 insurance contracts in march 2004 the international accounting standards board iasb issued ifrs 4. Why does ifrs 17 replace ifrs 4 the biggest differences. Ifrs 1 firsttime adoption of international financial reporting standards coming soon. The issuer may make that election contract by contract, but the election for each contract is irrevocable. Full retrospective application is required however, a.
The objective of ifrs 4 is to specify the financial reporting for insurance contracts by. Ifrs 17 insurance contracts replaces ifrs 4, which currently permits a wide variety of practices. Isap 4 ifrs 17 insurance contracts 21 november 2019. Applying ifrs 9 financial instruments with ifrs 4 insurance contracts efrags draft letter to the european commission page 3 of 35 in making these observations, efrag notes that the misalignment of effective dates is a. To illustrate a level of disclosures for insurance and. Ifrs 4 clarifies that a derivative embedded in an insurance contract need not be accounted for separately at fair value if the embedded derivative itself is an insurance contract. Ifrs 4 insurance contracts effective date periods beginning on or after 1 january 2005 because a specified debtor specific quantitative disclosure requirements.
Ifrs 4 phase ii unbundling prohibited if not required step 1. A company can choose to apply ifrs 17 before that date but only if it also applies. The overall objective of ifrs 17 is to provide a more useful and consistent accounting model for insurance contracts among entities issuing insurance contracts globally. More restrictive in comparison to current ifrs 4 phase i an insurance contract may contain one or more components that would be within the scope of another standard if they were separate contracts. Ifrs in your pocket 2017 7 developing ifrs ifrs foundation the ifrs foundation is the organisation that develops international financial reporting standards, for the public interest. Ifrs 4 insurance contracts is an interim standard until phase ii of iasb project on. Ifrs 17 insurance contracts reinsurance issues paper.
The ifrs foundations logo and the ifrs for smes logo, the iasb logo, the hexagon device, eifrs, ias, iasb, ifric, ifrs, ifrs for smes, ifrs foundation, international accounting standards, international financial reporting standards, niif and sic are registered trade marks of the ifrs foundation, further details of which are available from the ifrs. A link to the insurance contracts project page can be found in the box on the right. Iasb issues ifrs 17 the new standard for insurance contracts. Disclosure requirements ifrs 4 and ifrs 17 faq ifrs. Issues raised by the insurance industry ifrs 17 insurance. Those standards prohibit the setting off of onerous contracts against profitable contracts in the absence of contractual link but in balancing reasons for and against board maintains importance of transparency, but board accepts that insurance is different risk aggregation longer term contracts 21 importance of aggregation. Does the contract have to be unbundled into different components for which other ifrs. A summary of ifrs 4 insurance contracts, including information on current proposals and a timeline of past amendments, announcements, exposure drafts and consultations. It has a staff of around 160 people and has its main office in london and a smaller asiaoceania office in tokyo. Ifrs current ifrs 4 basis operating profit total assets liabilities to policyholders shareholders equity 4. International financial reporting standards ifrs ifrsbox. Ifrs 5 noncurrent assets held for sale and discontinued operations. Insurance contracts, in may 2017, applicable to reporting periods beginning on or after january 1, 2022.
Deferral of the date of initial application of ifrs 17 by one year. Ifrs 17 supersedes ifrs 4 and completes the boards project to establish a specific ifrs model for the accounting for insurance contracts. The differences in accounting treatment across jurisdictions and. Ifrs 4 applies, with limited exceptions, to all insurance contracts including. Ifrs 4 applies to virtually all insurance and reinsurance contracts that an entity issues and to reinsurance contracts that it holds. Applying ifrs 9 financial instruments with ifrs 4 insurance. Preliminary results of simplified case study ifrs 17. Reinsurer the party that has an obligation under a reinsurance contract to compensate a cedant if an insured event occurs. New insurance contracts standard introducing ifrs 17 kpmg. Ifrs 17 insurance contracts and its acceptability in its current form. Comprehensive manual explaining how to apply ifrs, focusing on practical.
Ifrs 3 business combinations ifrs 4 insurance contracts replaced by ifrs 17 from 1 january 2021 coming soon. In may 2016, the international accounting standards board the board completed its planned technical decisions on applying ifrs 9 financial instruments with ifrs 4 insurance contracts amendments to ifrs 4. Unbundling refers to the accounting for components of a contract as if they were separate contracts. Insurance contracts ifrs 4 ifrs practical implementation. More than 20 years in development, ifrs 17 represents a complete overhaul of accounting for.
The iasb has responded with its amendments to ifrs 4 insurance contracts. International financial reporting standard 4 insurance. Accounting for insurance contracts in accordance with ifrs 4. Ifrs 4 explains how to disclose insurance contracts, but to put it simple, there are too many issues with ifrs 4 to make a good comparisement among insurance companies and to. This chapter discusses the major issues covered under international financial reporting standard 4 ifrs 4. Ifrs 17 insurance contracts may 2017 downloadable pdf comprises three booklets sold together as a set, including the standard, basis for conclusions and illustrative examples. Ifrs 4 summary and timeline financial reporting icaew. The deferral approach agenda paper 14c this paper discusses deferring the effective date of ifrs 9 for entities that issue contracts that are within the scope of ifrs 4 until the new insurance contracts standard is applied. Ifrs 17 insurance contracts efrag sincerely appreciates the iasbs continued efforts to discuss issues associated with the implementation of ifrs 17 and the progress done so far to respond to the. Ifrs 4 profit reporting for south african life insurance contracts by szymon marszalek, peter tripe and dave strugnell presented at the actuarial society of south africas 20 convention 31 october1 november 20, sandton convention centre abstract nearly 20 years after inception, the insurance accounting project of the international. Ifrs update of standards and interpretations in issue at. Do multiple insurance contracts have to be combined into one. Sep 24, 2015 different effective dates of ifrs 9 and the new insurance contracts standard. Ifrs 17 insurance contracts preliminary results of simplified case study objective 1 the simplified case study was designed to provide input into efrags development of a draft endorsement advice on ifrs 17 insurance contracts.