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IFRS 4 – Insurance amendments

IFRS 4 – Insurance amendments

Proposals respond to industry concerns about the impact of differing effective dates


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Proposals aim to reduce the impact of the different effective dates of the new insurance standard and IFRS 9

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 industry concerns – in particular, temporary accounting mismatches and volatility, and increased costs and complexity – the IASB has proposed amendments to IFRS 4 Insurance Contracts.


“Given the looming effective date of IFRS 9, companies need to quickly consider the benefits and costs of the two proposed options, and whether either would reduce the potential impact. We urge you to respond to the IASB.” 

Proposed options

Temporary exemption from applying IFRS 9

  • Some entities would be permitted to defer the effective date of IFRS 9.
  • Insurance activities would have to be an entity’s predominant activity.
  • The temporary exemption would apply at the reporting entity level.

Overlay approach

  • For specified financial assets, the difference between the profit or loss figures under IFRS 9 and the previous standard could be recognised in other comprehensive income (OCI).
  • Eligible financial assets would relate to contracts that:
    • are in the scope of IFRS 4;
    • are classified at fair value through profit or loss (FVTPL) in their entirety under IFRS 9; and 
    • were not classified at FVTPL in their entirety under IAS 39.

Potential impacts

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

Temporary exemption from applying IFRS 9

  • Focus on the level of predominance – an example in the proposals indicates that an entity’s insurance activities may not be considered predominant where 75% of its liabilities are in the scope of IFRS 4.
  • Consider the cost of reporting in different ways at subsidiary and parent levels – a subsidiary might qualify for the temporary exemption even if its parent does not, or vice versa.
  • Consider the IFRS 9 disclosure requirements that would apply even under this approach – would they cause system changes and challenges?

Overlay approach

  • Think about the interaction between the overlay approach and the current process for shadow accounting.
  • Consider how to develop methods to calculate the differences between IFRS 9 and IAS 39 and to track financial assets, because financial reporting processes and systems would have to apply both standards in parallel for some financial assets.
  • Evaluate the costs involved to implement two major standards in a short period of time.

You have until 8 February 2016 to provide your comments on the proposals to the IASB.  

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 proposals. If you’re unable to view the presentation online, you can download a PDF version.

Read our New on the Horizon: Amendments to IFRS 4 Insurance Contracts to help you assess the potential impact of the proposed changes on your business, and how to respond to the IASB.

We will continue to report on significant developments and further decisions by the IASB on the new 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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