Ifrs 4 insurance contracts provides guidance on the accounting treatment of all. General insurers should not ignore ifrs 4 phase ii do you write multiyear contracts. Although the publication date of the forthcoming insurance contracts standard, ifrs 4 phase 2 ifrs 4 p2, is not yet known, the majority of its requirements have been tentatively agreed to by the iasb, including the detailed and complex presentation and disclosure. Phase 1completed in 2004 by issuing ifrs 4 insurance. Ifrs 4 exempts insurance companies from certain other ifrs standards, including ias 8 on changes in accounting policies, until phase ii is complete, but ifrs 4 does introduce its own requirements for changes in accounting policies. Ifrs 4 phase ii comparison with solvency ii and mcev.
Whilst the ifrs 4 phase ii requirements are still being finalised, deloitte has already organised an ifrs 4 phase ii seminar to discuss the technical requirements, potential impacts and changes in profit reporting. Ifrs 4 phase ii fundamentally rearranges international accounting of insurance contracts. Ifrs 4 international financial reporting standard 4 insurance contracts objective 1 the objective of this ifrs is to specify the financial reporting for insurance contracts by any entity that issues such contracts described in this ifrs as an insurer until the board completes the second phase of its project on insurance contracts. Aug 26, 2014 contents ifrs 4 background major issues covered in the first phase scope insurance contracts new definition contracts not recognised as insurance contracts income recognition changes in accounting policies waivers under ifrs 4 acquisition of insurance entities 3. Ifrs 4 phase i adjusts reporting of insurance contracts, defines a term insurance contract, bans generating catastrophe provisions or equalisation provisions, show a new view at reporting of insurance contract with discretionary participation feature and at reporting embedded derivates. There could be inconsistencies in the way an organizations risk profile is reported under ifrs 4 visavis solvency ii. Ifrs 4 applies, with limited exceptions, to all insurance contracts including. The solvency ii project is based on an economic balance sheet and proposes an economic valuation of insurance liabilities that is very close to the european industry position on assessment of risks and solvency. Ifrs 4 phase ii solves complex reporting of insurance. General insurers should not ignore ifrs 4 phase ii october 2015 do you write multiyear contracts. In ifrs, the measurement of contracts will depend on the classification as either insurance ifrs 4 phase ii or investment ifrs 9.
Disclosure requirements in ifrs 4 and ifrs 7 are the starting point additional disclosures include. Ifrs 4 phase ii measurement of nonparticipating contracts we will first look at the contracts in scope of ifrs 4 phase ii and how this compares to the other regimes solvency ii and mcev. Antworten mit fragezeichen ifrs 4 phase ii alexandria. The international accounting standards board iasb issued their revised exposure draft ed for ifrs 4 phase ii on 20 june 20, with the comment period concluding on 25 october 20. Whilst the implementation date for the new ifrs for insurance contracts is not deonitive, ed and solvency ii implementation projects are expected to run. Ifrs 4 phase ii latest developments the ifrs insurance contracts project is still in the pipeline after more than ten years work. It seems as if iasb is close to having a draft standard prepared and the speakers from deloittes thought 2020 or 2021 were likely implementation dates. In addition to solvency ii, which went live january 2016 in the european union, another regulation will soon change the face of the insurance industry ifrs 17 formerly known as ifrs 4 phase ii issued by the international accounting standards board iasb. The exposure draft requirements were also compared to the latest solvency ii developments. This alternative actuarial approach for ifrs 4 phase ii is basically a logical elaboration of current ifrs 4 phase i, because its key principles are defined much more concretely. Ifrs 4 phase ii, via modifications to the existing ifrs 4 insurance contracts standard ifrs 4, or the existing ifrs 4. Ifrs 4 international financial reporting standard 4 insurance contracts in march 2004 the.
Solvency ii requirements are also more prescriptive than ifrs 4 phase ii and mcev. Accounting of insurance contracts under ifrs 4 phase ii. Understanding the change in requirements resulting from ifrs 4 phase 2 understanding the new ifrs 4 phase 2 requirements the only way to fully understand the potential impact of ifrs 4 phase 2 is to work through the calculations. Potential impacts of ifrs 4 phase ii on nonlife insurance.
Measurement model building block approach onerous contracts test 3. The board decided to proceed in two phases in establishing the accounting for insurance contracts. Challenges in implementing ifrs 4 phase ii zeb control. Ifrs 4 insurance contracts ifrs 4 is approaching its final stages of development. Ifrs 4 phase ii and solvency ii ey united states pdf. Overview of solvency ii joint iaca, iaahs and pbss colloquium in hong kong. Current phase 2 timeline 5 2016 revenue ifrs 15 effective 1 january 2018 for noninsurance business models insurance contracts ifrs 4 phase ii final standard in 2016 ifrs standards financial asset and liabilities ifrs 9 2015 2017 2018 all ifrs standards are subject to eu endorsement. Provided essential support to a company in a comprehensive impact study regarding ed20108, including a gap analysis. New accounting standard for valuation of actuarial liabilities for both life and general insurersits different to current accounting and solvency ii.
In light of the iasbs comprehensive project on insurance contracts, the standard provides a temporary exemption from the requirements of some other ifrss, including the requirement to consider ias 8 accounting policies. Download ifrs 4 phase ii and solvency ii ey united states book pdf free download link or read online here in pdf. The ifrs exempts an insurer temporarily until completion of phase ii of the. With solvency ii and mcev, profits are recognised immediately. General insurers should not ignore ifrs 4 phase ii. Ifrs 4 applies, with limited exceptions, to all insurance contracts including reinsurance contracts that an entity issues and to reinsurance contracts that it holds. Ifrs 4 phase ii and solvency ii bridging the gap 1 the iasbs standard objectives are to ensure highquality, understandable, enforceable and globally accepted principles which will improve transparency and comparability of insurers o nancial statements regardless of sector, geography or products. The aims of ifrs and solvency ii are to facilitate comparability and transparency from a regulatory and accounting perspective to external stakeholders, in contrast to the divergent practices and measures which currently characterize insurance reporting. Ifrs 4 phase ii on general insurance reserving march 2015 iasb will decide at future meeting on effective date. In particular, it proposes requiring a nonnegative csm including rr revaluation reserve of fvoci assets that is identical to the outcome of a. The adoption of ifrs 4 means that companies will probably have to apply the. In particular, the board focused on three possible additional changes to the existing ifrs 4 to mitigate additional accounting mismatches and volatility in profit or loss that could arise when applying ifrs 9. Ifrs 4 phase ii transition donna mceneaney michael leitschkis june 2015 1 in this briefing note we take a closer look at the proposed accounting standard for insurance contracts ifrs 4 phase ii and how insurance companies opening balance sheets will change at the transition date. Developed prototypes and valuation models, decision tress and accounting schemes.
The international accounting standards board iasb issued their revised exposure draft ed for ifrs 4 phase ii on 20 june 20, with the. In light of the iasbs comprehensive project on insurance contracts, the standard provides a temporary exemption from the requirements of some other ifrss, including the requirement to consider ias 8 accounting policies, changes in accounting estimates and errors when selecting accounting policies for insurance contracts. Efficient project management should build in phase ii awareness. There was an update on ifrs 4 phase ii at the recent ilag financial reporting seminar. Basics of ifrs 4 for life insurers fs 10 aktuariatwitzel. We will then compare each of the building blocks of ifrs 4 phase ii measurement to the corresponding building blocks of the other regimes. The converse is true for those insurers that approach the change in a piecemeal fashion. Ifrs 4 insurance contracts the objective of this ifrs is to specify the financial reporting for insurance contracts by any entity that issues such contracts described in this ifrs as an insurer until the board completes the second phase of its project on insurance contracts. Contents ifrs 4 background major issues covered in the first phase scope insurance contracts new definition contracts not recognised as insurance contracts income recognition changes in accounting policies waivers under ifrs 4. Ifrs 4 phase ii for insurance contracts deloitte belgium audit. One alternative is to provide 3 years between adoption of ifrs 9 and ifrs 4 phase ii.
The delay in drafting this standard reflects the divergent opinions expressed at different stages in the project, and the complexity of ensuring consistency with the corpus of standards. Ifrs 4 insurance contracts superseded related news. Solvency is likely to be implemented at least a couple of years ahead of ifrs 4 phase ii. Introduction to ifrs 4 phase ii four key concepts for nonlife insurers 2. Solvency ii and international financial reporting standards ifrs phase ii. The taxing issue of ifrs 4 phase ii financial services. Now that the exposure draft for ifrs 4 phase ii has been published, insurance companies can get a better understanding of its implications and consider how they would need to adjust their insurance related balances. Jan 20, 2016 insurance webcast 56 the iasb has completed its deliberations on ifrs 4 phase ii. In particular, the proposed ifrs 4 phase ii approach to profit reporting is contrasted with the current financial soundness valuation fsv approach for simple illustrative term and endowment insurance products.
Ifrs 4 phase ii, for example, uses a contractual service margin to spread profits over the duration of the contracts. Implementation of ifrs4 phase ii technical and practical. Some of these cookies are necessary, while others help us analyse our traffic, serve advertising and deliver customised experiences for you. Are you undertaking, or planning, systems or data projects. Read online ifrs 4 phase ii and solvency ii ey united states book pdf free download link book now.
However, for insurers, it makes complete business sense to take a coordinated approach for the implementation of both directives, given the. Understanding the new ifrs 4 phase 2 requirements kpmg. Iasb has decided to provide additional transition relief for ifrs 9 upon adoption of ifrs 4 phase ii. If youre looking for a free download links of solvency ii and ifrs4. An evaluation of the proposed ifrs 4 phase ii measurement. Wide diversity of insurance contracts and business models. Ifrs 4 phase ii and s2 balance sheet mazars switzerland. International financial reporting standard 4 insurance contracts. Final ifrs 9 issued july 2014 original ifrs 9 effective date january 1, 2018 expiry of ifrs 9 transition options for insurers the earlier of ifrs 4 phase ii becoming effective or january 1, 2021 final ifrs 4 phase ii expected during 2016 anticipated effective date of ifrs 4 phase ii january 1, 2020 or 2021 ifrs 4 phase ii. Ifrs 4 phase ii ifrs 17 time to act roger simler, prashanth ariyam, naadira ebrahim deloitte glen daly hsbc 4 november 2016 agenda i.
According to the current level of discussion, the publications of the final standard is expected for end2016. All books are in clear copy here, and all files are secure so dont worry about it. Potential impacts of ifrs 4 phase ii on nonlife insurance accounting by adrian ruegg in audit, financial services, 09. I hope that kpmgs illustrative presentation and disclosures in the new report opening the black box. A more detailed reconciliation of changes in contract balances including disclosures about changes in risk adjustments and residual margins information about the effect of the regulatory frameworks in which the. Ifrs 4 phase ii institute and faculty of actuaries. Ifrs 4 phase ii for insurance contracts deloitte belgium. Iasb decides to mitigate impact of applying ifrs 9 before. Product strategies under solvency ii and ifrs 4 phase ii. Insurance webcast 62 ifrs 4 phase ii will be ifrs 17, effective from 1121. Identification and analysis of the underwriting and investment risks. Financial instruments, while sam makes no such distinction.
Solvency ii compared to ifrs4 phase ii pdf, epub, docx and torrent then this site is not for you. The introduction of ifrs 4 phase ii may bring some challenges for companies. Divergent reporting standards in the insurance industry lead to discrepancies and confusion in comparing accounting results from different geographies. Demystifying ifrs 4 phase 2 will help you develop your understanding of the complexity and consequences of the forthcoming insurance contract standards. Publication of the ifrs 4 phase ii insurance contracts standard expected. A major prerequisite for the successful implementation of ifrs 4 phase ii is a deep insurancespecific understanding of the measurement methods, the related data requirements and on top of that a clear view on the underlying processes and data flows within a company which must be organized. Ifrs 4 phase ii and s2 balance sheet goals of ifrs standards principle based ensuring understanding, relevance, reliability and comparability are hard to apply for insurance contracts. Contemporary a lack of market standards and the focus on a cash flow perspective lead to a greater need of good ifrs expertise and deep it knowhow. The real time convergence of solvency ii and ifrs 4 phase ii seems unlikely. The impact of ifrs 7 and revised ifrs 4 on insurers financial reporting.
Standards boards iasb new ifrs standard for insurance contracts ifrs 4 phase ii. In spite of similarities between ifrs 4 phase ii and the pillar 3 of solvency ii, there will be challenges in implementation. In2 this ifrs is a stepping stone to phase ii of this project. Get an overview of this topic and request our free booklet accounting of insurance contracts under ifrs 4 phase ii and our ifrs 4. Even if the change to ifrs 4 phase ii does not directly result in a change, solvency ii may give rise to such a change by removing solvency i as the basis for local gaap or as the tax base itself. Ifrs 4 includes the definition of an insurance contract and the ifrs classification depends on the level of insurance risk transferred to the insurer. Dec 29, 2008 the paper discusses key issues and reflects the current debates around two important regulatory projects. Eligibility for the simplified approach may be tougher than you think. New standard should replace the current ifrs4 and introduce consistent accounting method for insurance contracts reexposure draft released in june 20 simultaneously with the ifrs 4, the ifrs 9 on recognition and measurement of financial instruments is being developed. Insurance webcast 62 ifrs 4 phase ii will be ifrs 17.