IASB staff recommend a narrow scope amendment to IFRS 17
21 May 2021
For the upcoming meeting of the IASB, the IASB staff have recommended a narrow scope amendment to IFRS 17 that relates to interaction between IFRS 17 and IFRS 9’s transition requirements.
The current transition requirements may result in an accounting mismatch between financial assets and insurance contract liabilities that could arise at the beginning of the comparative period in case of financial assets that are derecognised during the comparative period. For insurance companies that have deferred the adoption of IFRS 9, but elect to restate comparative figures upon adoption of IFRS 9, financial assets derecognised during the comparative period (i.e. 2022) are required to be measured in accordance with IAS 39 Financial Instruments: Recognition and Measurement and the financial assets that continue to be recognised at the date of initial application are required to be measured in accordance with IFRS 9 Financial Instruments. This could lead to financial assets being measured under two different bases in the comparative period.
To address this issue, the IASB staff have recommended a narrow-scope amendment to IFRS 17 that would permit an entity, on initial application of IFRS 17, for the purpose of presenting comparative information, to elect to measure at fair value through profit or loss financial assets derecognised between the transition date and the date of initial application of IFRS 17 if certain conditions are met.
If the IASB agrees with the staff recommendation, they would propose to issue an Exposure Draft with a comment period of less than 120 days.
The agenda paper on this topic may be accessed here.