Ifrs 4 international financial reporting standard 4 insurance contracts in march 2004 the. Whilst the ifrs 4 phase ii requirements are still being finalised, deloitte has already organised an ifrs 4 phase ii seminar to discuss the technical requirements, potential impacts and changes in profit reporting. Overview of solvency ii joint iaca, iaahs and pbss colloquium in hong kong. Ifrs 4 international financial reporting standard 4 insurance contracts objective 1 the objective of this ifrs is to specify the financial reporting for insurance contracts by any entity that issues such contracts described in this ifrs as an insurer until the board completes the second phase of its project on insurance contracts. Ifrs 4 phase ii reexposure draft the actuarial society of. Understanding the new ifrs 4 phase 2 requirements kpmg. Ifrs 4 includes the definition of an insurance contract and the ifrs classification depends on the level of insurance risk transferred to the insurer. Iasb decides to mitigate impact of applying ifrs 9 before. Potential impacts of ifrs 4 phase ii on nonlife insurance accounting by adrian ruegg in audit, financial services, 09.
Disclosure requirements in ifrs 4 and ifrs 7 are the starting point additional disclosures include. Ifrs 4 insurance contracts provides guidance on the accounting treatment of all. Ifrs 4 phase i adjusts reporting of insurance contracts, defines a term insurance contract, bans generating catastrophe provisions or equalisation provisions, show a new view at reporting of insurance contract with discretionary participation feature and at reporting embedded derivates. Jan 20, 2016 insurance webcast 56 the iasb has completed its deliberations on ifrs 4 phase ii. Ifrs 4 phase ii solves complex reporting of insurance. Final ifrs 9 issued july 2014 original ifrs 9 effective date january 1, 2018 expiry of ifrs 9 transition options for insurers the earlier of ifrs 4 phase ii becoming effective or january 1, 2021 final ifrs 4 phase ii expected during 2016 anticipated effective date of ifrs 4 phase ii january 1, 2020 or 2021 ifrs 4 phase ii. Current timetable comment period for ifrs 207 ed ended 25 october 20. Ifrs 4 phase ii and s2 balance sheet mazars switzerland. All books are in clear copy here, and all files are secure so dont worry about it.
In particular, the board focused on three possible additional changes to the existing ifrs 4 to mitigate additional accounting mismatches and volatility in profit or loss that could arise when applying ifrs 9. Measurement model building block approach onerous contracts test 3. Whilst the implementation date for the new ifrs for insurance contracts is not deonitive, ed and solvency ii implementation projects are expected to run. Antworten mit fragezeichen ifrs 4 phase ii alexandria. The exposure draft requirements were also compared to the latest solvency ii developments. General insurers should not ignore ifrs 4 phase ii october 2015 do you write multiyear contracts. Phase 1completed in 2004 by issuing ifrs 4 insurance. Now that the exposure draft for ifrs 4 phase ii has been published, insurance companies can get a better understanding of its implications and consider how they would need to adjust their insurance related balances. The introduction of ifrs 4 phase ii may bring some challenges for companies.
The delay in drafting this standard reflects the divergent opinions expressed at different stages in the project, and the complexity of ensuring consistency with the corpus of standards. In light of the iasbs comprehensive project on insurance contracts, the standard provides a temporary exemption from the requirements of some other ifrss, including the requirement to consider ias 8 accounting policies. Ifrs 4 applies, with limited exceptions, to all insurance contracts including reinsurance contracts that an entity issues and to reinsurance contracts that it holds. Understanding the change in requirements resulting from ifrs 4 phase 2 understanding the new ifrs 4 phase 2 requirements the only way to fully understand the potential impact of ifrs 4 phase 2 is to work through the calculations. Ifrs 4 phase ii, via modifications to the existing ifrs 4 insurance contracts standard ifrs 4, or the existing ifrs 4. Product strategies under solvency ii and ifrs 4 phase ii. The international accounting standards board iasb issued their revised exposure draft ed for ifrs 4 phase ii on 20 june 20, with the comment period concluding on 25 october 20. The converse is true for those insurers that approach the change in a piecemeal fashion. Ifrs 4 phase ii transition donna mceneaney michael leitschkis june 2015 1 in this briefing note we take a closer look at the proposed accounting standard for insurance contracts ifrs 4 phase ii and how insurance companies opening balance sheets will change at the transition date. In particular, the proposed ifrs 4 phase ii approach to profit reporting is contrasted with the current financial soundness valuation fsv approach for simple illustrative term and endowment insurance products. Dec 29, 2008 the paper discusses key issues and reflects the current debates around two important regulatory projects. The ifrs exempts an insurer temporarily until completion of phase ii of the. Solvency is likely to be implemented at least a couple of years ahead of ifrs 4 phase ii. In2 this ifrs is a stepping stone to phase ii of this project.
The international accounting standards board iasb issued their revised exposure draft ed for ifrs 4 phase ii on 20 june 20, with the. Ifrs 4 phase ii, for example, uses a contractual service margin to spread profits over the duration of the contracts. The taxing issue of ifrs 4 phase ii financial services. Ifrs 4 insurance contracts the objective of this ifrs is to specify the financial reporting for insurance contracts by any entity that issues such contracts described in this ifrs as an insurer until the board completes the second phase of its project on insurance contracts. Are you undertaking, or planning, systems or data projects. Implementation of ifrs4 phase ii technical and practical.
Solvency ii requirements are also more prescriptive than ifrs 4 phase ii and mcev. Ifrs 4 phase ii comparison with solvency ii and mcev. Eligibility for the simplified approach may be tougher than you think. Although the publication date of the forthcoming insurance contracts standard, ifrs 4 phase 2 ifrs 4 p2, is not yet known, the majority of its requirements have been tentatively agreed to by the iasb, including the detailed and complex presentation and disclosure. Ifrs 4 phase ii fundamentally rearranges international accounting of insurance contracts. This alternative actuarial approach for ifrs 4 phase ii is basically a logical elaboration of current ifrs 4 phase i, because its key principles are defined much more concretely. Potential impacts of ifrs 4 phase ii on nonlife insurance. Ifrs 4 phase ii and solvency ii bridging the gap 1 the iasbs standard objectives are to ensure highquality, understandable, enforceable and globally accepted principles which will improve transparency and comparability of insurers o nancial statements regardless of sector, geography or products. According to the current level of discussion, the publications of the final standard is expected for end2016. In light of the iasbs comprehensive project on insurance contracts, the standard provides a temporary exemption from the requirements of some other ifrss, including the requirement to consider ias 8 accounting policies, changes in accounting estimates and errors when selecting accounting policies for insurance contracts. Ifrs 4 phase ii and s2 balance sheet goals of ifrs standards principle based ensuring understanding, relevance, reliability and comparability are hard to apply for insurance contracts.
There could be inconsistencies in the way an organizations risk profile is reported under ifrs 4 visavis solvency ii. Ifrs 4 phase ii latest developments the ifrs insurance contracts project is still in the pipeline after more than ten years work. Solvency ii and international financial reporting standards ifrs phase ii. International financial reporting standard 4 insurance contracts. New accounting standard for valuation of actuarial liabilities for both life and general insurersits different to current accounting and solvency ii. In spite of similarities between ifrs 4 phase ii and the pillar 3 of solvency ii, there will be challenges in implementation. Ifrs 4 insurance contracts ifrs 4 is approaching its final stages of development. Publication of the ifrs 4 phase ii insurance contracts standard expected. Insurance webcast 62 ifrs 4 phase ii will be ifrs 17, effective from 1121. The real time convergence of solvency ii and ifrs 4 phase ii seems unlikely. Demystifying ifrs 4 phase 2 will help you develop your understanding of the complexity and consequences of the forthcoming insurance contract standards. A more detailed reconciliation of changes in contract balances including disclosures about changes in risk adjustments and residual margins information about the effect of the regulatory frameworks in which the. Iasb has decided to provide additional transition relief for ifrs 9 upon adoption of ifrs 4 phase ii. Ifrs 4 phase ii for insurance contracts deloitte belgium audit.
However, for insurers, it makes complete business sense to take a coordinated approach for the implementation of both directives, given the. We will then compare each of the building blocks of ifrs 4 phase ii measurement to the corresponding building blocks of the other regimes. A major prerequisite for the successful implementation of ifrs 4 phase ii is a deep insurancespecific understanding of the measurement methods, the related data requirements and on top of that a clear view on the underlying processes and data flows within a company which must be organized. In addition to solvency ii, which went live january 2016 in the european union, another regulation will soon change the face of the insurance industry ifrs 17 formerly known as ifrs 4 phase ii issued by the international accounting standards board iasb. Ifrs 4 phase ii measurement of nonparticipating contracts we will first look at the contracts in scope of ifrs 4 phase ii and how this compares to the other regimes solvency ii and mcev. Insurance webcast 62 ifrs 4 phase ii will be ifrs 17. With solvency ii and mcev, profits are recognised immediately.
This fragmented reporting regime can make insurers. Ifrs 4 exempts insurance companies from certain other ifrs standards, including ias 8 on changes in accounting policies, until phase ii is complete, but ifrs 4 does introduce its own requirements for changes in accounting policies. Read online ifrs 4 phase ii and solvency ii ey united states book pdf free download link book now. Provided essential support to a company in a comprehensive impact study regarding ed20108, including a gap analysis. Ifrs 4 phase ii on general insurance reserving march 2015 iasb will decide at future meeting on effective date. In particular, it proposes requiring a nonnegative csm including rr revaluation reserve of fvoci assets that is identical to the outcome of a. Introduction to ifrs 4 phase ii four key concepts for nonlife insurers 2. It seems as if iasb is close to having a draft standard prepared and the speakers from deloittes thought 2020 or 2021 were likely implementation dates.
Ifrs 4 phase ii and solvency ii ey united states pdf. General insurers should not ignore ifrs 4 phase ii. Ifrs 4 phase ii institute and faculty of actuaries. Challenges in implementing ifrs 4 phase ii zeb control. The board decided to proceed in two phases in establishing the accounting for insurance contracts.
Even if the change to ifrs 4 phase ii does not directly result in a change, solvency ii may give rise to such a change by removing solvency i as the basis for local gaap or as the tax base itself. Basics of ifrs 4 for life insurers fs 10 aktuariatwitzel. Ifrs 4 is an international financial reporting standard ifrs issued by the international. Efficient project management should build in phase ii awareness. Contents ifrs 4 background major issues covered in the first phase scope insurance contracts new definition contracts not recognised as insurance contracts income recognition changes in accounting policies waivers under ifrs 4. Identification and analysis of the underwriting and investment risks. If youre looking for a free download links of solvency ii and ifrs4.
Contemporary a lack of market standards and the focus on a cash flow perspective lead to a greater need of good ifrs expertise and deep it knowhow. Wide diversity of insurance contracts and business models. There was an update on ifrs 4 phase ii at the recent ilag financial reporting seminar. Some of these cookies are necessary, while others help us analyse our traffic, serve advertising and deliver customised experiences for you. New standard should replace the current ifrs4 and introduce consistent accounting method for insurance contracts reexposure draft released in june 20 simultaneously with the ifrs 4, the ifrs 9 on recognition and measurement of financial instruments is being developed. Divergent reporting standards in the insurance industry lead to discrepancies and confusion in comparing accounting results from different geographies. Accounting of insurance contracts under ifrs 4 phase ii. Current phase 2 timeline 5 2016 revenue ifrs 15 effective 1 january 2018 for noninsurance business models insurance contracts ifrs 4 phase ii final standard in 2016 ifrs standards financial asset and liabilities ifrs 9 2015 2017 2018 all ifrs standards are subject to eu endorsement.
An evaluation of the proposed ifrs 4 phase ii measurement. Aug 26, 2014 contents ifrs 4 background major issues covered in the first phase scope insurance contracts new definition contracts not recognised as insurance contracts income recognition changes in accounting policies waivers under ifrs 4 acquisition of insurance entities 3. General insurers should not ignore ifrs 4 phase ii do you write multiyear contracts. Get an overview of this topic and request our free booklet accounting of insurance contracts under ifrs 4 phase ii and our ifrs 4.
In ifrs, the measurement of contracts will depend on the classification as either insurance ifrs 4 phase ii or investment ifrs 9. Ifrs 4 applies, with limited exceptions, to all insurance contracts including. The adoption of ifrs 4 means that companies will probably have to apply the. I hope that kpmgs illustrative presentation and disclosures in the new report opening the black box. The impact of ifrs 7 and revised ifrs 4 on insurers financial reporting. Ifrs 4 phase ii ifrs 17 time to act roger simler, prashanth ariyam, naadira ebrahim deloitte glen daly hsbc 4 november 2016 agenda i. Ifrs 4 insurance contracts superseded related news. The aims of ifrs and solvency ii are to facilitate comparability and transparency from a regulatory and accounting perspective to external stakeholders, in contrast to the divergent practices and measures which currently characterize insurance reporting. Solvency ii compared to ifrs4 phase ii pdf, epub, docx and torrent then this site is not for you.
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