IASB, during its January meeting, continued to consider its response to the concerns and implementation challenges raised in relation to IFRS 17, the new insurance contracts standard. IASB decided to propose targeted improvements in three areas that it expects will ease implementation of IFRS 17 and also make it easier for companies to explain the results of applying IFRS 17 to investors and others.
The changes IASB voted to propose are linked to the recognition of contract costs, reinsurance contracts, and the investment service elements of a contract. IASB will continue its discussions at future meetings and expects to publish a document for consultation on proposed narrow-scope amendments around the middle of the year. IASB concluded that, on balance, these amendments meet the criteria for potential changes that IASB agreed in October 2018.
IASB issued IFRS 17 in May 2017 and the standard will be effective for annual reporting periods beginning on or after January 01, 2021. Insurance contracts combine features of both a financial instrument and a service contract. In addition, many insurance contracts generate cash flows with substantial variability over a long period. To provide useful information about these features, IFRS 17:
- combines current measurement of the future cash flows with the recognition of profit over the period that services are provided under the contract
- presents insurance service results (including presentation of insurance revenue) separately from insurance finance income or expenses
- requires an entity to make an accounting policy choice of whether to recognize all insurance finance income or expenses in profit or loss or to recognize some of that income or expenses in other comprehensive income
Keywords: International, Accounting, Insurance, IFRS 17, Insurance Contract, January Meeting, IASB
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