OSFI Proposes Changes to Guideline on IFRS 9 as a Result of IFRS 17
OSFI proposed changes to the guideline on IFRS 9 and the guideline (D-5) on accounting for structured settlements. These changes are a result of the IFRS 17 standard, the effective date for which is for annual periods beginning on or after January 01, 2023. OSFI also proposed to rescind some guidelines as a result of IFRS 17. The OSFI letter sets out, in the Annexes, a summary of the guidelines to be rescinded or amended and the list of guidelines that may be part of a separate track and considered out of scope for this consultation. OSFI also seeks suggestions for guideline amendments not already in progress that may require further refinement to reflect IFRS 17 or IFRS 9. The comment period for this consultation ends on September 15, 2021.
The D-5 guideline contains reference to the superseded standard IFRS 4, which will be updated to reference IFRS 17. The IFRS 9 Financial Instruments and Disclosures guideline will replace the following:
- D-1A (replaced by IFRS 9 Financial Instruments and Disclosures Section 3.1)
- D-1B (replaced by IFRS 9 Financial Instruments and Disclosures Section 3.2)
- D-6 (replaced by IFRS 9 Financial Instruments and Disclosures Section 3.3)
- D-10 (replaced by IFRS 9 Financial Instruments and Disclosures Section 1.IV)
IFRS 9 Financial Instruments and Disclosures Section 1.IV will also update the Fair Value Option annual gross revenue threshold from $62.5 million to $75 million. This aligns with OSFI’s 2023 Draft Capital Adequacy Requirement guideline definition of Small and Medium-sized Entity borrowers in Chapter 5, paragraph 68. Furthermore, the IFRS 9 Financial Instruments and Disclosures guideline includes the following additional guidance: Section 2.3 - Impairment guidance applicable to Life Insurers. The guidance states that OSFI expects life insurers to limit their use of the more-than-30-days-past-due rebuttable presumption in IFRS 9 paragraph 5.5.11, as a primary indicator of transfer to lifetime Expected Credit Loss (ECL) measurement for material loans. OSFI believes that this guidance will promote sound credit risk practices associated with the implementation and ongoing application of the IFRS 9 ECL accounting framework for life insurers.
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Comment Due Date: September 15, 2021
Keywords: Americas, Canada, Banking, Insurance, IFRS 9, IFRS 17, Disclosures, Insurance Contracts, Financial Instruments, Credit Risk, ECL, Impairment Guidance, OSFI
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CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
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