25. June 2020

IASB publishes amendments to IFRS 17 and IFRS 4

The IASB today published the final amendments to IFRS 17 on the accounting for insurance contracts. At the same time, a related amendment to IFRS 4 was made, extending the existing option for a deferred first-time adoption of IFRS 9 to the new effective date of IFRS 17.

The amendments to IFRS 17 are a collection of numerous selective adjustments with which the IASB aims to provide companies with relief when introducing the standard without significantly reducing the benefits of presenting decision-useful information. The main changes compared to the existing version of IFRS 17 are as follows:

  • Scope: Changes were made for credit cards and loan agreements that contain insurance components.
  • Contract acquisition costs: In future, a portion of acquisition premiums paid for insurance contracts are to be allocated to expected future renewals.
  • Contractual service margin allocation (CSM) for investment services: If insurance contracts include investment services in addition to insurance services, the CSM is to be split between the two services under certain conditions, and thus possibly over a period longer than that of the insurance benefit.
  • Reinsurance contracts: If reinsurance contracts have been entered into for loss-bearing primary insurance contracts, corresponding profit amounts from the reinsurance contract must be recognized immediately in the income statement in addition to the losses from such a primary insurance contract.
  • Risk mitigation: The risk mitigation exemption was extended to reinsurance contracts and derivatives.
  • Interim financial statements: An option is created as to whether assumptions made for interim periods are retained (date-to-date) or reversed (year-to-date) in subsequent reporting periods.
  • Effective date: The mandatory date of first-time adoption was postponed by two years to 1 January 2023.
  • Option to defer first-time adoption of IFRS 9: The option for companies to defer first-time adoption of IFRS 9 and to apply it concurrently with IFRS 17 was also extended until January 1, 2023.

As expected, no change was made to the issue of annual cohorts, which remains controversial.

The text of IFRS 17 and these subsequent amendments are only available from the IASB and only for a fee (for further information, please click here).