IASB issues IFRS 17 amendments
3 July 2020: The amended IFRS 17 standard is now effective for annual periods beginning on or after 1 January 2023 with earlier application permitted, writes ICAEW’s Zsuzsanna Schiff.
On 25 June 2020, the International Accounting Standards Board (IASB) finalised its IFRS 17 project and issued Amendments to IFRS 17 and the Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4).
This publication follows an extensive period of monitoring insurers’ implementation activities by the board. After IFRS 17 was first issued in May 2017, stakeholders expressed serious concerns regarding the implementation of the standard. Considering the feedback received the IASB proposed a set of narrow scope adjustments, on which they consulted in 2019.
The main changes resulting from the newly published amendments are:
- Deferral of the date of initial application of IFRS 17 by two years to annual periods beginning on or after 1 January 2023 and change the fixed expiry date for the temporary exemption from applying IFRS 9 Financial Instruments
- Additional scope exclusion for some loans and credit card contracts
- Recognition of insurance acquisition cash flows relating to expected contract renewals
- Allocation of acquisition costs to expected contract renewals
- Attribution of profit to service related to investment activities
- Extension of the risk mitigation option to include reinsurance contracts held.
- Reduced accounting mismatches for reinsurance: amendments to require an entity recognise losses on onerous insurance contracts at initial recognition would also recognise a gain on reinsurance contracts held.
- Simplified balance sheet presentation: presentation of insurance contract assets and liabilities using portfolios rather than groups of insurance contracts.
- Additional transition reliefs: for business combinations, for application of the risk mitigation option and the use of the fair value transition approach.
- Clarification of the application of IFRS 17 in interim financial statements allowing an accounting policy choice at a reporting entity level.
There are several other areas where stakeholders were hoping for amendments but the IASB decided against them. The most significant of these is the annual cohort requirement.
The ICAEW Financial Services Faculty will be holding meetings of its IFRS17 Discussion Group with the primary purpose of discussing the implementation of IFRS 17 with respect to UK market-specific factors and UK products.