Trésorier/Treasurer magazine - N°98 - July/Aug/Sep 2017 - 41

NEWS

IFRS 17

- IASB ISSUES
IFRS 17 the new Standard for

The main features of the new accounting model for insurance
contracts are:
* A measurement of the present value of future cash ﬂows,
incorporating an explicit risk adjustment, remeasured every
reporting period (the fulfilment cash flows)

OVERVIEW OF THE IFRS 17 MODEL

IFRS 17 must be first applied for reporting periods starting on
or after 1 January 2021, with comparative figures being required. Early application is permitted, provided the entity also
applies IFRS 9 Financial Instruments and IFRS 15 Revenue from
Contracts with Customers on or before the date it first applies
IFRS 17. An entity that adopts IFRS 9 at the same time that it
adopts IFRS 17 will be able to apply the transitional provisions of
IFRS 9, which include certain designations and de-designations
of financial assets.

Jean-Michel Pacaud,
Partner,
EY Luxembourg

- JULY
N°98

-

* A specific adaptation for contracts with direct participation
features (the Variable Fee Approach)
* A simplified approach (Premium Allocation Approach) mainly
for short-duration contracts

* A Contractual Service Margin (CSM) that is equal and opposite
to any day one gain in the fulfilment cash flows of a group
of contracts, representing the unearned profitability of the
insurance contract to be recognized in profit or loss over the
service period (i.e., coverage period)
* Certain changes in the expected present value of future cash
flows are adjusted against the CSM and thereby recognized in
profit or loss over the remaining contract service period
* The effect of changes in discount rates will be reported in
either profit or loss or other comprehensive income (OCI),
determined by an accounting policy choice
* A presentation of insurance revenue and insurance service
expenses in the statement of comprehensive income based on
the concept of services provided during the period
* Amounts that the policyholder will always receive regardless
of whether an insured event happens (non-distinct investment
components) are not presented in the income statement, but
are recognized directly in the balance sheet
* Insurance services results (earned revenue less incurred
claims) are presented separately from the insurance finance
income or expense
* Extensive disclosures to provide information on the recognized
amounts from insurance contracts and the nature and extent
of risks arising from these contracts

LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE

After a very long journey, the International Accounting Standards
Board (IASB or the Board) issued IFRS 17 Insurance Contracts
(IFRS 17). IFRS 17 will be mandatorily effective for annual reporting periods beginning on or after 1 January 2021. Once effective,
IFRS 17 replaces IFRS 4 Insurance Contracts that was issued in
2005. The overall objective of IFRS 17 is to provide a more useful
and consistent accounting model for insurance contracts among
entities issuing insurance contracts globally.
In response to comments received on the 2013 revised Exposure
Draft (2013 ED), the IASB revisited a number of aspects of its
proposed model. The re-deliberations resulted in changes to
several areas of the model, but the overall objective to measure
insurance contracts on a current basis has been retained. The
IASB concluded that the changes made in response to feedback
received on the 2013 ED did not include any fundamental changes
that constituents have not had the opportunity to comment on
during development of the standard. The Board also noted that
extensive consultations had taken place throughout the project.
Therefore, the Board concluded it could issue the final standard
without the need for further re-exposure.
In contrast to the requirements in IFRS 4, which are largely based
on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering
all relevant accounting aspects. The core of IFRS 17 is the General
(building block) Model, supplemented by:

/ AUG / SEP 2017

insurance contracts

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Trésorier/Treasurer magazine - N°98 - July/Aug/Sep 2017

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