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    Thursday 23 May 2019

    IASB Update February 2019 - Amendments to IFRS 17 Insurance Contracts (Agenda Paper 2)

    By IASB - February 2019 

    The Board met on 7 February 2019 to consider possible amendments to IFRS 17 Insurance Contracts relating to the following topics:

    • loans that transfer significant insurance risk—Agenda Paper 2A; and
    • transition—Agenda Papers 2B, 2C and 2D.

    Loans that transfer significant insurance risk (Agenda Paper 2A)
    The Board tentatively decided to amend the scope of IFRS 17 and IFRS 9 Financial Instruments for insurance contracts that provide insurance coverage only for the settlement of the policyholder’s obligation created by the contract. These amendments would enable entities issuing such contracts to account for those contracts applying either IFRS 17 or IFRS 9. The choice would be made portfolio by portfolio, using the IFRS 17 definition of a portfolio.

    Thirteen of 14 Board members agreed and one disagreed with this decision.

    Transition—Optionality and comparative information (Agenda Paper 2B)
    The Board tentatively decided to:

    • retain the IFRS 17 transition requirements without making amendments that would reduce the optionality included in those requirements; and
    • retain the IFRS 17 requirement to present restated comparative information for the annual reporting period immediately preceding the date of initial application of IFRS 17.

    All 14 Board members agreed with these decisions.

    Transition—Risk mitigation option and amounts accumulated in other comprehensive income on transition (Agenda paper 2C)
    The Board tentatively decided to retain the transition requirement in IFRS 17 that prohibits retrospective application of the risk mitigation option.

    Thirteen of 14 Board members agreed and one disagreed with this decision. The Board asked the staff to continue to explore alternative proposals that would address stakeholders’ concerns about the results of not applying the option retrospectively.

    The Board also tentatively decided to retain the transition requirements in IFRS 17 relating to the cumulative amounts included in other comprehensive income.

    All 14 Board members agreed with this decision.

    Transition—Modified retrospective approach (Agenda paper 2D)
    The Board tentatively decided to:

    1. retain the transition requirements in the modified retrospective approach set out in IFRS 17 that:
    • prohibit an entity from using a specified modification to the extent that the entity has reasonable and supportable information to apply the related IFRS 17 requirement retrospectively; and
    • permit an entity to use a specified modification only when the entity has reasonable and supportable information to apply that modification.

            2.   retain the transition requirements in IFRS 17 for the modified retrospective approach, without                    an amendment that would permit an entity to develop its own modifications that it regards as                      consistent with the objective of the modified retrospective approach. However, the Board                              noted the importance of the clarification in the paper that the existence of specified                                            modifications does not preclude the normal use of estimation techniques.

            3.  amend the transition requirements in IFRS 17 for liabilities that relate to the settlement of                              claims incurred before an insurance contract was acquired as follows:

    • to add a specified modification to the modified retrospective approach so that an entity classifies such liabilities as a liability for incurred claims. Consistent with the other specified modifications, an entity would be permitted to use this specified modification only to the extent that it does not have reasonable and supportable information to apply a retrospective approach.
    • to permit an entity applying the fair value approach to choose to classify such liabilities as a liability for incurred claims.

            4.   retain without amendment the specified modification in the modified retrospective approach                      relating to the use of cash flows that are known to have occurred, instead of estimating                                    retrospectively cash flows that were expected to occur.
            5.   retain the modified retrospective approach for insurance contracts with direct participation                          features, without an amendment that would permit an entity to apply to such contracts the                          specified modifications permitted for insurance contracts without direct participation features.

    All 14 Board members agreed with this decision.

    Next step
    The Board will continue its discussions on possible amendments to IFRS 17 at future meetings

    For further information, please contact :

    Mohammed Yaqoob
    Global Office
    E: myaqoob@nexia.com

     View IFRS: IASB Update February 2019 here.

    The Board met on 7 February 2019 to consider possible amendments to IFRS 17 Insurance Contracts
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