KPMG’s ISG recently published New on the Horizon: Insurance Amendments, which provides an overview of the proposed amendments to IFRS 4, Insurance Contracts. The proposal addresses the temporary consequences that would result from the different effective dates of IFRS 9, Financial Instruments, which is effective for annual periods beginning on or after January 1, 2018, and the forthcoming insurance contracts standard, which likely will be effective in 2020 or 2021. Specifically, the proposal would supplement the accounting options that exist within IFRS 4 to address accounting volatility that may arise:
- The overlay approach would permit entities that issue insurance contracts to remove from profit or loss (and recognize in other comprehensive income) the difference between the amounts that would be recognized under IFRS 9 and IAS 39, Financial Instruments: Recognition and Measurement, for specified assets related to insurance activities.
- The deferral approach would permit certain entities that issue insurance contracts to elect a temporary exemption from applying IFRS 9.
The comment deadline is February 8, 2016.