Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts

BACKGROUND

The Accounting Standards Board (AcSB) is participating in the International Accounting Standards Board’s (IASB) project to amend International Financial Accounting Standard (IFRS) 4 Insurance Contracts.

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The objective of this project is to address the temporary accounting consequences of the different effective dates of IFRS 9 Financial Instruments and the new insurance contracts standard.

The AcSB’s due process includes ensuring that Canadian entities’ financial reporting needs are considered by the IASB and issuing the AcSB’s own exposure draft on each IASB proposal.  Subject to the responses to the AcSB’s exposure draft on whether the IASB’s proposals are appropriate for application in Canada, the AcSB expects that the amendments will be incorporated into Canadian GAAP in accordance with the AcSB’s strategy of adopting IFRSs for publicly accountable enterprises.

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PROJECT NEWS

Final Amendments – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
September 15, 2016.  The IASB has issued narrow-scope amendments to IFRS 4 addressing concerns arising from implementing IFRS 9 before implementing the replacement standard that the IASB is developing for IFRS 4.

AcSB Decision Summary – March 22-23, 2016
The AcSB discussed the latest developments in the IASB’s Insurance Contracts project and the feedback the IASB received to its Exposure Draft, “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts.”  Board members advised the AcSB Chair on points to raise with the IASB at the April 2016 meeting of the Accounting Standards Advisory Forum (see the Forum’s Agenda Papers 6-6C).  No decisions were made.

AcSB Response – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
On February 8, 2016, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft issued in December 2015. The letter agrees with the concerns raised in the Exposure Draft and supports a global solution. The letter supports both the overlay and the deferral approach for a specific group of entities. However, as stated in the Exposure Draft, the current proposals for the predominance test would exclude many entities recognized as insurance entities. As such, the letter proposed modifications to the predominance test. Modifying the predominance test could allow the threshold to be very high, such as substantially all liabilities. A high threshold is important so that only a limited group of entities have the opportunity to defer IFRS 9. The letter also supports the deferral approach at the reporting entity level. However, the letter recognizes that in order to ensure that an entity with significant banking activities implements IFRS 9 in 2018, the deferral approach might need to go below the reporting entity level. Read the AcSB letter posted by the IASB.

AcSB Decision Summary – February 1 and 9, 2016
The AcSB discussed and approved its response letter to the IASB’s Exposure Draft, “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts,” subject to drafting changes.

AcSB Decision Summary – January 12, 2016
The AcSB continued to discuss the IASB’s Exposure Draft, “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts.” 

The AcSB encourages stakeholders to share their views on the Exposure Drafts issued by the IASB and the AcSB by submitting comment letters by February 8, 2016.

AcSB Exposure Draft – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts, (Proposed amendments to IFRS 4) 
January 12, 2016. The AcSB has issued an Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Stakeholders are encouraged to submit their comments, on the form provided, by February 8, 2016.

AcSB Decision Summary – December 15, 2015
The AcSB reviewed the due process steps undertaken related to IFRS 4 Insurance Contracts and considered feedback on that process from a recent meeting of the AcSB’s Insurance Accounting Task Force and other stakeholders. No decisions were made.

The AcSB also discussed the IASB’s Exposure Draft, “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts.”  The AcSB encourages stakeholders to share their views on the Exposure Draft with the IASB by submitting comment letters by February 8, 2016.

IASB Exposure Draft – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Proposed Amendments to IFRS 4)
December 11, 2015. The IASB has issued an Exposure Draft proposing amendments to IFRS 4 Insurance Contracts. Canadian stakeholders are encouraged to submit their comments to the IASB by February 8, 2016.

AcSB Decision Summary – November 24, 2015
The AcSB discussed the IASB’s preliminary proposals to provide transition relief to respond to the possible accounting consequences of the different effective dates of IFRS 9 Financial Instruments and the forthcoming new insurance contracts standard on the adoption of IFRS 9. The AcSB will continue to engage with Canadian stakeholders, the IASB and other standard setters as well as advisory groups to influence the development of a global solution. 

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.