IFRS Interpretations Committee - Agenda decision on transfer of insurance coverage under a group of annuity contracts

The IFRS Interpretations Committee (Committee) has published a final agenda decision (available here) on methods for determining the amount of revenue to be recognised on immediate annuity contracts. It was confirmed and published by the International Accounting Standards Board (IASB) in July 2022.

As a reminder, IFRS 17 Insurance Contracts (IFRS 17) requires an entity to measure the total margin (also called the contractual service margin or CSM) on a group of insurance contracts at the subscription date, and then to allocate the CSM by “coverage unit” over the expected coverage period. Immediate annuity contracts are those under which the policyholder makes a non-refundable payment upfront in exchange for a periodic payment that starts immediately after contract inception for as long as the policyholder survives.

The standard does not specify a particular method for identifying coverage units, other than that they should reflect the services provided in each period to the policyholder under the contract. The request submitted to the Committee related to how these services should be defined in order to determine whether a method is acceptable or not. The request sets out two possible methods: the first presupposes that the expected annuity payment remains constant over time, and the second presupposes that annuity payments will reduce over time, as the likelihood of the policyholder’s survival diminishes as they get older.

The Committee concluded that the first method is acceptable. However, it rejected the second method on the grounds that, if the insurer has accepted and managed the risk that the policyholder may survive longer than expected, the compensation pertains to the risk adjustment for non-financial risk that is recognised separately from the contractual service margin.

IASB publishes final amendments on supplier finance arrangements

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OECD Pillar Two rules – Amendments to IAS 12 Incomes Taxes (IFRS) and to FRS 102 and FRS 101

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IFRS Interpretations Committee – Agenda decision on definition of a lease: substitution rights

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IFRS 9 Financial Instruments – Financial assets with ESG features

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Proposed amendment to IAS 12 Income Taxes – Pillar Two model rules

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Classification of Liabilities as Current or Non-current – Interaction with convertible debt

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Hot Topic publication: Key Highlights Checklist from the FRC’s Annual Review of Corporate Reporting 2021/22

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Hot Topic publication: Accounting & Corporate Reporting – Key considerations and reminders for 2022/2023

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IFRS Interpretations Committee – Agenda decision on SPACs: classification of public shares as financial liabilities or equity

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IFRS Interpretations Committee – Agenda decision on negative low emission vehicle credits

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Amendments to IFRS 16 Leases – Lease Liability in a Sale and Leaseback

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Hot Topic publication: Accounting & Corporate Reporting – Key considerations and reminders for 2021/2022

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Post-Implementation Review of IFRS 9 Financial Instruments (Phase 1) begins

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Understanding the accounting for configuration or customisation costs in Software as a Service (SaaS) cloud-based arrangements

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Hot Topic publication: Interim Reporting – What does good? Key highlights checklist from the FRC’s thematic review

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IASB consults on its agenda to 2026 asking clear questions about priorities for future activities

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Reverse factoring – Guidance on the applicable requirements under IFRS

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Primary Financial Statements project – Redeliberations begin by the IASB on the exposure draft: General Presentation and Disclosures that propose substantial changes to reporting financial performance

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IFRS 16 Leases – Amendment to extend the relief period for lessees accounting for Covid-19-related rent concessions

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Hot Topic publication: What does good look like?– Improving cash flow statements and liquidity disclosures

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Top tips for 2020/21 annual reporting

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Impact of Covid-19: Accounting for rent concessions under IFRS and FRS 102 – The differences, similarities and are they enough?

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Hot Topic publication: Reporting on the impact of Covid-19 – Key disclosure expectations for 2020/21

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Hot Topic publication: Key Highlights Checklist from the FRC’s Annual Review of Corporate Reporting 2019/20

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s172 statements and COVID-19: an opportunity to tell your story

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IFRS 17 Insurance Contracts – Deferred effective date of IFRS 17 and the temporary exemption of IFRS 9

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Liability classification amendments to IAS 1, issued by the IASB, may in practice result in presentational changes of loans and borrowings

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Revenue recognition under IFRS 15 – Compensation payable to customers could give rise to the recognition of negative revenue

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IBOR Reform – Comparing LIBOR vs SONIA following the IASB’s (phase 1) amendments to IFRS 9, IAS 39 and IFRS 7

Last week, the International Accounting Standards Board (“IASB”) issued amendments to the financial instruments standards, IFRS 9 Financial Instruments (“IFRS 9”), IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”) and IFRS 7 Financial Instruments: Disclosures (“IFRS 7”), setting out changes to some of the hedge accounting requirements in order to provide temporary relief to […]

IFRS 17 Insurance Contracts exposure draft – Key points

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FRS 101 amendments – Changes that prohibit insurers applying FRS 101 in their financial statements

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IBOR Reform – Proposed amendments to the financial instruments standards, IAS 39 and IFRS 9, on affected hedging relationships

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Holdings of Cryptocurrencies – The IFRS Interpretations Committee confirmed which, and how, IFRS standards are to be applied

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IFRS 16 Leases – Disclosures required in the first set of interim financial statements

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IFRS 17 Insurance Contracts – Exposure draft is imminent

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IFRS 17 Insurance Contracts – Final amendments planned at April 2019 meeting

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IFRS 17 Insurance Contracts – Amendments planned at March 2019 meeting

At the March meeting, the IASB continued its discussions on the amendments necessary to IFRS 17 Insurance Contracts, which are looking to address the criticisms raised by stakeholders and thus to more faithfully represent the performance of insurance contracts in financial statements. At the end of this meeting the IASB tentatively decided to add additional […]

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IFRS 17 Insurance Contracts – Amendments planned at February 2019 meeting

At the February meeting, the IASB continued its discussions on the amendments necessary to IFRS 17 Insurance Contracts, which are looking to address the criticisms raised by stakeholders and thus to more faithfully represent the performance of insurance contracts in financial statements. At the end of this meeting the IASB tentatively decided to add additional […]

IFRS 17 Insurance Contracts – Amendments planned at January 2019 meeting

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TRG Insights on IFRS 17 for Mutuals and Associations

1. Group insurance policies Under a group insurance policy an entity provides insurance coverage to members of an association or to customers of a bank (members or customers that purchase insurance coverage are referred to as ‘certificate holders’). Some of those policies give the entity the right to terminate the coverage for all certificate holders […]

Industry clarity on the IFRS 17 implementation road

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IFRS 17: 3 early lessons and practical insights

A year and a few months after the issue of the new insurance contracts standard, insurers (issuers of insurance contracts) are recalibrating their IFRS 17 implementation approaches based on the latest technical developments and positions adopted by their peers. Latest developments include the IASB’s transition resource group discussions, the recent clarifications to IFRS 17 discussed […]

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