The International Accounting Standards Board (the Board) has today confirmed it will amend the current insurance contracts Standard, IFRS 4. This is to address issues that may arise from implementing the new financial instruments Standard, IFRS 9, before implementing the new insurance contracts Standard which will replace IFRS 4.
At its May meeting, the Board concluded deliberations on this topic and asked staff to draft the final amendments to IFRS 4 Insurance Contracts, which the Board expects to issue in September 2016.
The new insurance contracts Standard is currently being drafted and the Board expects to issue it around the end of 2016 with an effective date no earlier than 2020. Both IFRS 9 Financial Instruments, effective 1 January 2018, and the new insurance contracts Standard are relevant to companies that issue insurance contracts.
Responding to some companies’ concerns about the timing of the implementation of the two Standards and the related consequences, the Board has, following public consultation, confirmed that it will issue amendments to IFRS 4 that:
- give companies that issue insurance contracts the option to remove from profit or loss the volatility that may be caused by certain changes in the measurement of financial assets when applying IFRS 9 before the new insurance contracts Standard; and
- give companies whose predominant activities are insurance-related an optional temporary exemption from applying IFRS 9 until 2021.
The amendments to IFRS 4 will supplement existing options in that Standard that could be used to address the volatility that may be caused by applying IFRS 9 before the new insurance contracts Standard.