Insurance – Fine-tuning the forthcoming standard

Insurance – Fine-tuning the forthcoming standard

This IFRS newsletter brings you the latest on the IASB's insurance project.


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We examine the latest developments and what the discussions could mean for you.

The IASB has turned its attention to sweep issues that have arisen during the balloting process for the forthcoming insurance contracts standard.

At its June meeting, the Board discussed considerations affecting measurement of, and adjustments to, the contractual service margin (CSM), insurance finance income and expenses, and accounting for reinsurance contracts.


“The Board is fine-tuning the forthcoming insurance contracts standard, and is proposing a principles-based allocation of insurance finance expenses to profit or loss.”


For a detailed discussion of these developments, read Issue 55 of our IFRS Newsletter: Insurance. Previous issues can be found on our Newsletters page.

Measuring the CSM after inception

The IASB specified the objective for the release of the CSM, namely that the CSM at the reporting date represents the profit for the future services to be provided for a group of contracts. 

The group would be the same as that used to determine when contracts are onerous, and the release would reflect the expected duration and size of the contracts remaining in the group at the end of the period.

Insurance finance income or expenses

The IASB agreed to remove the objective to present insurance finance income or expenses in profit or loss on a cost measurement basis for entities that disaggregate insurance finance income or expenses between profit or loss and other comprehensive income. 

Additionally, they agreed to specify that in such circumstances an entity should present, in profit or loss, a ‘systematic allocation’ of the total expected insurance finance income or expenses over the life of the contract. 

They also provided guidance on how to determine the systematic allocation, and agreed that an entity does not need to disaggregate the change in the risk adjustment into a finance component and an underwriting component.

Other sweep issues

The IASB agreed to provide guidance on what changes in the fulfilment cash flows relate to future service and thus, adjust the CSM, and what changes relate to current and past service and thus, do not adjust the CSM. 

The Board also agreed that the variable fee approach should not apply to reinsurance contracts issued or held.

Next steps

The Board is continuing its balloting process for the forthcoming insurance contracts standard and expects to discuss the effective date in the third quarter of 2016. It expects to issue the final standard around the end of 2016.

Visit our IFRS – Insurance hot topics page for the latest developments in the insurance contracts project.

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