What is the main difference between IFRS 4 and IFRS 17?
The key difference between IFRS 17 and IFRS 4 is the consistency of application of accounting treatments to areas such as revenue recognition and liability valuation. Profit recognition at the start of the contract. Revenue includes premium and may include an investment component.
Which contracts fall within the scope of IFRS 4?
IFRS 4 applies to all insurance contracts (including reinsurance contracts) that an entity issues and to reinsurance contracts that it holds, except for specified contracts covered by other Standards.
What is IFRS 4 explain?
IFRS 4 is an International Finance Reporting Standard (IFRS) that is issued by the International Accounting Standards Board (IASB). It provides guidance for the accounting insurance contracts. But the comprehensive project on insurance contracts is underway meaning that this is not the last one.
Is IFRS 4 still applicable?
IFRS 4 was issued in March 2004 and applies to annual periods beginning on or after 1 January 2005. IFRS 4 will be replaced by IFRS 17 as of 1 January 2023.
Why did IFRS 17 replace IFRS 4?
IFRS 17 replaces IFRS 4 Insurance Contracts. When introduced in 2004, IFRS 4—an interim Standard—was meant to limit changes to existing insurance accounting practices. Hence, IFRS 4 has allowed insurers to use different accounting policies to measure similar insurance contracts they write in different countries.
What is OCI under IFRS 17?
OCI option IFRS 17 allows insurers to decide whether the impact of changes in economic / fi- nancial assumptions will be accounted for through the insurance financial result, therefore impacting the P&L, or through OCI. This option can be taken at a port- folio level.
What is the objective of IFRS 4?
The objective of IFRS 4 is to specify the financial reporting for insurance contracts by any entity that issues such contracts (described in IFRS 4 as an insurer).
What IFRS 4 states?
IFRS 4 defines an insurance contract as a “contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.” The standard provides …
What do you mean by insurance contract?
An Insurance Contract may be defined as an agreement between two parties whereby one party is called an insurer and the other is called insured. The Insurer which is the Insurance Company undertakes, in exchange of fixed premium to pay the Insured fixed amount of money on the happening of a certain event.
Does IFRS 17 replace IFRS 4?
When to not unbundle IFRS 4 Phase II?
IFRS 4 Phase II (unbundling prohibited if not required) Step 1: Do not unbundle if investment component is highly interrelated (not a distinct component) cannot benefit from one component without the other being present, policyholder cannot lapse one without the other, or can only value one with the other.
Why was IFRS 4 issued to insurance companies?
A comprehensive project on insurance contracts is under way. The Board issued IFRS 4 because it saw an urgent need for improved disclosures for insurance contracts, and some improvements to recognition and measurement practices, in time for the adoption of IFRS by listed companies throughout Europe and elsewhere in 2005.
When is unbundling allowed in an insurance contract?
Unbundling is only allowed if it is required. More restrictive in comparison to current IFRS 4 (Phase I) An insurance contract may contain one or more components that would be within the scope of another standard if they were separate contracts. Unbundling is only allowed if it is required.
How is IFRS 4 exempt from accounting standards?
IFRS 4 exempts an insurer temporarily (ie until it adopts IFRS 17) from some requirements of other Standards, including the requirement to consider the Conceptual Framework in selecting accounting policies for insurance contracts. However, IFRS 4: