Insurance – Further transition relief considered

Insurance – Further transition relief considered

IASB responds to concerns about effective date of forthcoming insurance IFRS.

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Successive changes in financial reporting will pose a challenge to users.

Effective date to be after IFRS 9

With discussions on participating contracts continuing into the first half of 2015, the forthcoming insurance contracts standard will not be published before late 2015 at the earliest. 

Because the IASB plans to allow approximately three years between publishing the final standard and having it come into effect, the earliest possible mandatory effective date will now be later than that for IFRS 9 Financial Instruments (which is 1 January 2018).

 

“Preparers are concerned about implementing two major standards in a short period of time; but even more important would be the challenge to users posed by successive changes in financial reporting.”

 

IASB responds to stakeholder concerns

Stakeholders have raised concerns about applying the classification and measurement requirements of IFRS 9 without being able to fully evaluate the implications of the forthcoming insurance contracts standard. In response, the IASB has confirmed:

  • the limited fair value option redesignations for financial assets on initial application of the insurance contracts standard that were included in the 2013 exposure draft;  
  • that it will consider providing further transition relief to permit, or require, a company to reassess the business model for financial assets at the date of initial application of the forthcoming insurance contracts standard. 

Two Board members suggested that deferring the mandatory effective date of IFRS 9 for companies that are significantly impacted by the forthcoming insurance contracts standard would allay insurers’ concerns – both about implementing IFRS 9 without fully evaluating the forthcoming insurance requirements, and over the practical issues associated with two substantial rounds of accounting changes. The Board discussed the merits and demerits of this proposal, and decided not to pursue it. 

Next steps for the project

The staff will consider consequential issues arising from further transition relief at a future meeting, and the mandatory effective date for the new insurance contracts standard after deliberations on the model for participating contracts have been completed.

We will continue to report on the latest developments in the IASB’s insurance contracts project. Visit our IFRS – Insurance hot topics page.

 

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