The International Accounting Standards Board (IASB) proposed a narrow-scope amendment to the transition requirements in IFRS 17 on insurance contracts. The proposed amendment relates to financial assets for which comparative information presented on the initial application of IFRS 17 and IFRS 9 on financial instruments has not been restated for IFRS 9. Applying the proposed amendment, a company would be permitted to present comparative information about such a financial asset as if the classification and measurement requirements of IFRS 9 had been applied to that financial asset. The comment period is open until September 27, 2021, with the Board planning to complete any resulting amendment by the end of 2021.
Many insurers will apply IFRS 17 and IFRS 9 for the first time from 2023 and are at an advanced stage of preparing to apply these new standards. However, some of these insurers have informed IASB about significant temporary accounting mismatches on initial application of the new standards that can make the change in accounting more difficult to communicate to investors. These mismatches arise in circumstances when IFRS 9 is not reflected in the accounting for financial assets in the prior periods presented when IFRS 17 and IFRS 9 are first applied. The proposed narrow-scope amendment to IFRS 17 would enable the insurers to address this issue by giving them an option to present comparative information for certain financial assets in a manner consistent with IFRS 9.
IASB acknowledged that amending IFRS 17 so close to the effective date might appear to be inconsistent with the intention of providing a stable basis for the implementation of IFRS 17. However, in the Board’s view, introducing new transition relief at this stage is justified because entities became aware of the significant impact of the differing transition requirements, in particular the potential magnitude of accounting mismatches, only during the advanced stage of implementation. Furthermore, the Board concluded that the proposed amendment could be finalized in a timely manner without disrupting implementation because the proposed classification overlay is an optional relief and, therefore, would not impose changes on entities; moreover, this relates only to the presentation of comparative information on initial application and has no effect on the application of IFRS 17 and IFRS 9 after the date of initial application. The proposed amendment does not affect any other requirement in IFRS 17 and does not propose any change to the transition requirements in IFRS 9.
Comment Due Date: September 27, 2021
Keywords: International, Insurance, IFRS 17, IFRS 9, Insurance Contracts, Reporting, Financial Instruments, IASB
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