Keywords: Mazars, Thailand, IFRS, IFRS 17, IASB, CSM, VFA, FRA, MRA, FVA
31 October 2019
We present a concise tabular summary of the key points of this exposure draft. In the table below, the following acronyms are used, defined as follows:
- CSM (contractual service margin): a component of the book value of the asset or liability for a group of insurance contracts, representing the unearned profit the entity will recognise as it provides the services specified in these insurance contracts.
- VFA (variable fee approach): a specific recognition approach (as a modification to the general model) under IFRS 17 that is used only for insurance contracts with direct participation features.
- FRA (full retrospective approach): a transition approach to IFRS 17 which, except where an exemption is specifically permitted, requires fully retrospective application for insurance contracts at the date of transition to IFRS 17 (i.e. pre-existing contracts shall generally be recognised as if IFRS 17 had been applied since inception).
- MRA (modified retrospective approach): another transition approach (a more flexible variant of the FRA) that permits a limited number of specified exemptions to fully retrospective application for pre-existing contracts. It may only be used in situations where the FRA is not practicable.
- FVA (fair value approach): a third transition approach, which is significantly different from both the FRA and the MRA, in that the CSM is determined almost exclusively based on information and estimates available at the transition date. It may only be used in situations where the FRA is not practicable.
The key points of the exposure draft published in June are presented below:
The exposure draft also proposes a number of minor amendments (see paras. BC148−BC163) intended to clarify the terminology of IFRS 17 or to correct unintended consequences, omissions and conflicts between the requirements of IFRS 17 and those of other standards, such as IFRS 9.
It should be noted that the IASB has decided against amending IFRS 17 at this stage on a number of topics identified by stakeholders, which may continue to pose implementation challenges or risk failing to faithfully represent the performance of contracts within the scope of IFRS 17 over the coming years. These include:
- the requirement to group contracts into annual cohorts;
- the lack of separate presentation of premiums receivable in the statement of financial position;
- the prohibition on applying the VFA (variable fee approach) to reinsurance contracts issued and held;
- the retention of paragraph B137 of IFRS 17, which relates to interim financial statements and stipulates that insurers shall not change the treatment of accounting estimates made in previous interim financial statements. This paragraph sets out an exception to the general principle of IAS 34, which states that the frequency of an entity’s reporting shall not affect the measurement of its annual results.
The exposure draft is available on the IASB’s website .