09/12/2019 - EFRAG's feedback statement on IASB ED Amendments to IFRS 17
EFRAG published its final comment letter on the Exposure Draft Amendments to IFRS 17 ('the ED') on 24 September 2019. This feedback statement summarises comments received by EFRAG on its draft comment letter and explains how those comments were considered by EFRAG during its technical discussions leading to the publication of EFRAG's final comment letter.
Respondents agreed/supported the IASB's proposed amendments for scope exclusions; expected recovery of insurance acquisition cash flows; recovery of losses on underlying insurance contracts when using reinsurance contracts held; separate presentation in the statement of financial position of the carrying amount of portfolios of insurance contracts issued that are assets and those that are liabilities; and extending the risk mitigation option to reinsurance contracts held.
Respondents had concerns on the proposed amendments relating to contractual service margin attributable to investment-return service and investment-related service for contracts without investment components under the general model; the proposed definition of "proportionate reinsurance" being too narrow and restrictive; the scope of the risk mitigation option; not being able to apply the risk mitigation option retrospectively; and some unintended consequences arising from the minor amendments and proposed changes to terminology.
Respondents generally expressed significant support for the IASB to reconsider the application of annual cohorts for mutualised portfolios (generally seen as those under paragraphs B67 to B71) under the VFA.
Respondents supported the deferral of IFRS 17 and the alignment of effective dates of IFRS 17 and IFRS 9. Respondents from the industry in general supported 2023 as effective date. Respondents from other categories were split between 2022, 2023 and not indicating explicitly an effective date. Early adoption was as well supported.
Transition: Modified retrospective approach (‘MRA’) and fair value approach (‘FVA’) - seven constituents noted that the modified retrospective approach is too restrictive, unduly complex and rules-based and as a result, it currently forces entities to apply the FVA.
Balance sheet presentation: some constituents were in favour of separate presentation of receivables and payables but differed in view whether this should be mandatory or not.
Reinsurance contracts: contract boundary: Ten constituents disagreed with the IASB’s decision not to amendment IFRS 17.
The feedback statement can be found here.