8/13/2019 Update on IFRS 4

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On 20 June 2013, the IASB (the Board) published a revised exposure draft (ED) on

the accounting for insurance contracts reflecting its response to the comments received

on the 2010 ED (previous ED). The comprehensive proposals will fundamentally

change the accounting by insurers and other entities that issue insurance contracts.

The Board has attempted to address the concerns of constituents regarding the

perceived artificial volatility caused by the proposals in the previous ED, but these

changes add complexity. The proposed standard will replace IFRS 4, which currently

permits a wide variety of accounting practices for insurance contracts.

This practical guide summarises the key proposals and their implications. Appendix 1

compares these proposals with the previous ED. Appendix 2 compares the proposals

with the FASB ED that was issued on 27 June 2013. Appendix 4 provides a high-level

comparison of the revised ED with Solvency II. The questions in the IASB ED target

five key areas that have significantly changed since the previous ED as set out below:

residual margin).

y to hold underlying items and specify a link to

returns on those underlying items.

It is important for insurers and other entities issuing insurance contracts to assess how

all the requirements in the measurement model fit together. It will be critical for

insurers to work closely with stakeholders to make sure that they understand the

impact of the significant changes being proposed. This could be the last opportunity for

the industry to influence the debate before the expected effective date of 2018. Insurers

8/13/2019 Update on IFRS 4

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need to act now in assessing the implications of the new proposals on both their

contracts and business practices and to assess the additional demands of the proposals

on resources, data and modelling systems.

http://www.pwc.com/en_GX/gx/insurance/assets/pwc-practical_guide-to-ifrs-v2.pdf

Revised exposure draft will significantly change accounting forinsurance contracts

In June 2013, the IASB published a revised exposure draft (ED) on the accounting for insurance contracts. The comprehensive

proposals will fundamentally change the accounting by insurers and other entities that issue insurance contracts.

The IASB has attempted to address the concerns of constituents regarding the perceived artificial volatility caused by the

proposals in the previous ED, but these changes add complexity. The proposed standard will replace IFRS 4, which currentlypermits a wide variety of accounting practices for insurance contracts.

This practical guide summarises the key proposals and their implications. The questions in the IASB ED target five key areas that

have significantly changed since the previous ED as set out below:

The use of other comprehensive income (OCI) for changes in discount rates.

Unlocking the contractual service margin (previously known as the residual margin).

Contracts that require the entity to hold underlying items and specify a link to returns on those underlying items.

Presentation in the statement of comprehensive income.

Transition.

It is important for insurers and other entities issuing insurance contracts to assess how all the requirements in the measurement

model fit together. It will be critical for insurers to work closely with stakeholders to make sure that they understand the impact of

the significant changes being proposed.

This could be the last opportunity for the industry to influence the debate before the expected effective date of 2018. Insurers need

to act now in assessing the implications of the new proposals on both their contracts and business practices and to assess the

additional demands of the proposals on resources, data and modelling systems.

http://www.pwc.com/en_GX/gx/insurance/assets/pwc-practical_guide-to-ifrs-v2.pdfhttp://www.pwc.com/en_GX/gx/insurance/assets/pwc-practical_guide-to-ifrs-v2.pdfhttp://www.pwc.com/en_GX/gx/insurance/assets/pwc-practical_guide-to-ifrs-v2.pdf