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Transitioning to IFRS 17

Transitioning to IFRS 17

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Key observation

Map and compass

When applying the fair value approach upon transition to IFRS 17, the determination of the CSM does not include insurance acquisition cash flows that occurred before the date of transition.

Identifying insurance acquisition cash flows when applying the fair value transition approach

February 2018 TRG meeting

What's the issue?

Insurance acquisition cash flows are generally included in the measurement of the CSM, and a portion of the insurance revenue and expense recognised in a period includes amounts related to them.

When applying the fair value approach to transition, an insurer determines the CSM for a group of contracts at the date of transition based on the difference between the fair value of the group and the fulfilment cash flows of the group at that date.

A question has arisen over whether insurance acquisition cash flows that occurred before the date of transition are required to be identified and recognised as revenue and expense in reporting periods after the date of transition.

 

What did the TRG discuss?

TRG members appeared to agree that when applying the fair value approach on transition to IFRS 17, the measurement of the CSM does not include insurance acquisition cash flows that occurred before the date of transition. Therefore, these cash flows are not included in insurance revenue and expenses in reporting periods after the date of transition.

 

What's the impact?

This discussion should alleviate any concerns that an insurer would be required to identify insurance acquisition cash flows that occurred before the date of transition when applying the fair value approach.

 

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About this page

This topic page is part of our Insurance – Transition to IFRS 17 series, which covers the discussions of the IASB's Transition Resource Group (TRG) for Insurance Contracts

You can also find more insight and analysis on the new insurance contracts standard at kpmg.com/ifrs17.

 

 

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