Insurance amendments

Transcription

1 Insurance amendments Proposed amendments to address the impact of IFRS 9 on insurers 10 December 2015 kpmg.com/ifrs

2 Addressing differing effective dates The differing effective dates of IFRS 9 Financial Instruments and the new insurance contracts standard will have a significant impact on insurers. We encourage you to read our New on the Horizon, assess the impact on your business and participate in the debate. 2

3 Insurance contracts project nears its end The proposal to allow a temporary exemption from IFRS 9 increases the pressure to bring an end to the insurance contracts project in the short term. Joachim Kölschbach, KPMG s global IFRS insurance leader 3

4 What s the issue? Differing effective dates result in IFRS 9 Insurance standard Temporary volatility and accounting mismatches and Two implementation projects in a short period 4

5 Proposed requirements

6 The proposals Temporary exemption from applying IFRS 9 IFRS 9 Insurance standard Overlay approach FVTPL under IFRS 9 Impact of changes to FVTPL under IFRS Adjusted P&L 6

7 Temporary exemption from applying IFRS 9

8 Applying the temporary exemption Are the insurance activities predominant? No Yes Insurance standard IFRS 9 IFRS 9 Earlier of

9 Assessing predominance Temporary exemption 0% Indicative 75% 100% Mix of liabilities Liabilities in scope of IFRS 4 Other liabilities In general, who may be permitted to use the exemption? Pure bank Financial conglomerate Insurer with significant investment contracts Pure insurance company First time adopters of IFRS 9

10 Overlay approach

11 The proposals Overlay approach For financial assets related to insurance contracts On transition IAS 39 IFRS 9 Overlay adjustment Difference between IAS 39 and IFRS 9 Items measured at amortised cost or classified as AFS Items classified at FVTPL Move change in value to OCI 11

12 Weighing the costs and benefits Overlay approach Financial statements harder to understand All entities with insurance contracts can apply it Running two standards in parallel Temporary volatility relief in P&L Tracking financial assets Accounting mismatch relief in P&L Implementing two standards in short period Costs Benefits Use IFRS 9 expected credit loss impairment model 12

13 Presentation and disclosures

14 Temporary exemption IFRS 9 disclosure requirements would still apply for Credit risk and quality information Fair value for assets that would not meet the SPPI characteristics 14

15 Overlay approach A company may choose to present the adjustment in either P&L or OCI or P&L OCI P&L only OCI only P&L and OCI 15

16 Overlay approach A company may choose to present the adjustment on each individual line in either P&L or P&L P&L P&L Note 1 P&L Notes 16

17 Effective dates and transition

18 Timeline A If new insurance standard is effective before 2021 Q Amendments to IFRS 4 issued Companies may apply: Temporary exemption Overlay approach Full IFRS 9 1 January 2018 Effective date of amendments and IFRS 9 Effective date of new insurance standard Full IFRS 9 required 1 January

19 Timeline B If new insurance standard is effective after 2021 Q Amendments to IFRS 4 issued Companies may apply: Temporary exemption Overlay approach Full IFRS 9 1 January 2018 Effective date of amendments and IFRS 9 1 January 2021 Expiry date of temporary exemption Effective date of new insurance standard Full IFRS 9 required 19

20 Transition The IASB is proposing requirements when a company Starts applying an approach and Stops applying an approach The proposals aim for consistency with IFRS 9 20

21 Next steps Read our New on the Horizon and the IASB proposals Speak to your usual KPMG contact Comment on the proposals by 8 February

22 kpmg.com/socialmedia kpmg.com/app 2015 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.