TRG members discussed several implementation questions about the new standard
The IASB's Transition Resource Group (TRG) for Insurance Contracts provided useful observations on a number of challenging questions. Some of the main points on which the TRG members appeared to agree were as follows.
The contract is the lowest unit of account used under IFRS 17. In some circumstances, the legal form of a contract does not reflect the substance of its contractual rights and obligations. In these cases, separation of the contract is appropriate.
Read more | Identifying the insurance contract ►
When assessing which cash flows are within the contract’s boundary, an entity considers its ability to reassess the risks of the contract. The reassessed risks are policyholder risks.
Read more | Defining contract boundaries ►
The cash flows within the boundary of a reinsurance contract held are determined considering the entity’s right to receive services from the reinsurer.
Read more | Accounting for reinsurance contracts held ►
Any insurance acquisition cash flows directly attributable to individual contracts, and paid unconditionally on initially written contracts, should be included in the measurement of the group containing those contracts. In addition, these cash flows cannot be allocated to future groups recognised on renewal or other groups that do not contain these contracts.
Read more | Measuring insurance cash flows ►
Mixed views were expressed around what considerations apply when determining coverage units. The TRG will continue this discussion at its May meeting, when it discusses contracts with investment components.
Read more | Measuring the CSM ►
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.
Read more | Transitioning to IFRS 17 ►
When applying the premium allocation approach (PAA), only premiums received are included when measuring the liability for remaining coverage. In addition, groups of insurance contracts that are either assets or liabilities are presented separately in the statement of financial position.
Some TRG members raised operational concerns about applying these requirements and expressed that the presentation may not provide useful information to users of the financial statements. This topic will be considered for discussion at a future TRG meeting.
The IASB will be informed of the TRG discussion. This is expected to help the Board determine what, if any, action is needed to address the implementation questions discussed.
The TRG’s next meeting will be held on 2 May 2018.
Stakeholders are encouraged to submit implementation questions to the TRG as long as they meet the certain criteria. To be considered for discussion at the TRG's next meeting in May, questions need to be submitted by 21 March. To find out more about the criteria or to submit a question, visit the IASB’s TRG for Insurance Contracts page.
We would like to acknowledge the principal authors of the February 2018 Transition to IFRS 17 articles:
Bryce Ehrhardt and Hagit Keren.
We would also like to thank the following reviewers for their input:
Alan Goad, Joachim Kölschbach, Chris Spall and Mary Trussell.
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