What is the objective of IFRS 4?
The objective of IFRS 4 is to specify the financial reporting for insurance contracts by any entity that issues such contracts (described in IFRS 4 as an insurer).
What happened IFRS 4?
IFRS 4 was issued in March 2004 and applies to annual periods beginning on or after 1 January 2005. IFRS 4 will be replaced by IFRS 17 as of 1 January 2023.
Does IFRS 4 permit an insurer to continue its existing accounting policies?
IFRS 4 exempts an insurer temporarily (ie until it adopts IFRS 17) from some requirements of other Standards, including the requirement to consider the Conceptual Framework in selecting accounting policies for insurance contracts.
Why is recognizing profit over the term of the contract important?
Recognizing Revenue Over Time Judgment is needed to determine which method better reflects the transfer of promised goods or services. One method per performance obligation is used and must be applied consistently to similar performance obligations.
Does IFRS 17 replace IFRS 4?
IFRS 17 replaces IFRS 4, which currently permits a wide variety of practices. IFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features.
How will IFRS 17 affect insurance?
IFRS 17 requires a company to measure insurance contracts using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to insurance contracts. This requirement will provide transparent reporting about a company’s financial position and risk.
What is the difference between life insurance and non life insurance?
Life insurance provides a lump sum amount of sum assured at the time of maturity or in case of death of the policyholder. Non-life insurance policies offer financial protection to a person for health issues or losses due to damage to an asset.
Why is revenue recognition so important?
The revenue recognition principle, a key feature of accrual-basis accounting, dictates that companies recognize revenue as it is earned, not when they receive payment. Accurate revenue recognition is essential because it directly affects the integrity and consistency of a company’s financial reporting.
When will IFRS 4 Phase II become effective?
(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
What is IFRS 4 Phase II – unbundling?
IFRS 4 Phase II (unbundling prohibited if not required) Step 1: Do not unbundle if investment component is highly interrelated (not a distinct component) cannot benefit from one component without the other being present, policyholder cannot lapse one without the other, or can only value one with the other.
What is IFRS 4 Phase II Solvency II market consistent embedded value?
IFRS 4 Phase II Solvency II Market Consistent Embedded Value Scope of liabilities • Insurance Contracts and Investment Contracts with DPF (if also insurance contracts sold). • Transaction based –insurance contracts as defined by IFRS. • Insurance and Investment Contracts, full balance sheet.
What is the reported insurance liability under IFRS 4 Phase II?
For a non-onerous contract, the reported insurance liability IFRS 4 Phase II is equal to 0 at inception as the constitution of the contractual service margin cancels out the negative risk adjusted present value of the future cash flows. 33© 2013 Deloitte Belgium Master: 1 Deloitte Template
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