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IASB amends IFRS 4

16 September 2016

The International Accounting Standards Board has issued amendments to its existing insurance contracts standard, IFRS 4.

The amendments address concerns over the implementation of the new financial instruments standard, IFRS 9 and the temporary volatility in reporting results.

Two approaches have been introduced – an overlay approach and a deferral approach.

The amended standard will:
• Give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts standard IFRS 4 is issued.
• Give companies whose activities are predominantly connected with insurance an optional temporary exemption from apply IFRS 9 until 2021. The entities that defer the application of IFRS 9 will continue to apply the existing financial instruments standard – IAS 39.

IASB chairman, Hans Hoogervorst , said: “Both the new financial instruments standard and the upcoming insurance standard will improve the quality and comparability of financial reporting. However, we understand that there may be transitional challenges and have given companies who deal with insurance contracts two voluntary options for dealing with these.”

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