Insurance – IFRS 4 amendments

Insurance – IFRS 4 amendments

Amendments respond to industry concerns about the impact of differing effective dates.


KPMG AG Wirtschaftsprüfungsgesellschaft


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The two optional solutions reduce the impacts but include various complexities.

The differing effective dates of IFRS 9 Financial Instruments and the new insurance contracts standard could have a significant impact on insurers.

In response to concerns regarding temporary accounting mismatches and volatility, and increased costs and complexity, the IASB has issued amendments to IFRS 4 Insurance Contracts.

The amendments reduce the impacts, but companies need to carefully consider their IFRS 9 implementation approach to decide if and how to use them. The two optional solutions raise some considerations which require detailed analysis and management judgement. 


“Given the looming effective date of IFRS 9, companies need to quickly consider the benefits and costs of the two optional solutions, and whether one should be elected.”  

Two optional solutions

Temporary exemption from IFRS 9

  • Rather than having to implement IFRS 9 in 2018, some companies will be permitted to continue to apply IAS 39 Financial Instruments: Recognition and Measurement.
  • To qualify, a reporting company’s activities need to be predominantly connected with insurance.

Overlay approach

  • This optional solution provides an overlay approach to presentation to alleviate temporary accounting mismatches and volatility.
  • For designated financial assets, a company is permitted to reclassify between profit or loss and other comprehensive income (OCI), the difference between the amounts recognised in profit or loss under IFRS 9 and those that would have been reported under IAS 39.


Deciding how to best use the amendments

When deciding if and how to use the amendments, consider:

  • the costs and benefits of the two optional solutions;
  • how effective each solution is in mitigating any costs arising from the differing effective dates;
  • if and how your peers will use the amendments; and
  • the expectations and reactions of investors and other users of your financial statements.


Potential impacts

When assessing the impact of these amendments on your business, consider the following.

  • Judgement may be needed to complete the predominance assessment. To qualify for the temporary exemption, management will have to consider both qualitative and quantitative factors in determining whether the company meets the eligibility criteria.
  • Applying the temporary exemption for companies within a group structure could result in companies preparing financial reports under both IAS 39 and IFRS 9. If applicable, management will have to consider the costs and complexities of these situations at the group and stand-alone reporting levels.
  • Companies applying the overlay approach will have to produce and track IAS 39 and IFRS 9 amounts in parallel for designated financial assets.

If you would like to discuss the possible impacts on your business, please speak to your usual KPMG contact.

Find out more

View our SlideShare presentation for a high-level visual summary of the amendments. If you’re unable to view the presentation online, you can download a PDF version.

Our First Impressions contains insight and analysis that can help you assess the potential impact of the amendments on your business.

We will continue to report on significant developments and further decisions by the IASB on the forthcoming insurance contracts standard. Visit our IFRS – Insurance hot topics page. And visit our IFRS – Financial instruments hot topics page to find out more about IFRS 9.

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