The May 2016, Issue 54 of KPMG ISG’s IFRS Newsletter: Insurance highlights the May IASB meeting, at which the Board finished discussions about its Exposure Draft, Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts.
Temporary Exemption – Eligibility Reassessment Criteria. The Board decided that an entity that applies but subsequently ceases to be eligible for the temporary exemption would be required to apply IFRS 9 in the second annual reporting period that begins after the change in eligibility. The Board also decided to permit an entity that is not eligible for the temporary exemption at the initial assessment date to reassess its eligibility before the mandatory effective date of IFRS 9 if there is a demonstrable change in its corporate structure that could result in a change in the predominant activities of the entity.
Other Target Areas. The Board confirmed that first-time adopters of IFRS that meet the eligibility requirements and qualifying criteria would be permitted to apply the temporary exemption and the overlay approach. The Board also addressed the requirement to apply uniform accounting policies when using the equity method of accounting for investments in associates and joint ventures. The Board decided to provide relief from that requirement if either the investor or the investee applies the temporary exemption, but the other does not. The Board confirmed that the temporary exemption will expire January 1, 2021.
Next Steps. The Board directed the staff to begin the balloting process. The final amendments to IFRS 4 are expected to be published in September 2016. The Board is continuing its balloting process for the forthcoming insurance contracts standard and expects to issue it around the end of 2016.