IFRS IC Agenda Decision on the IFRS 17 multi-currency groups of insurance contracts
Keywords: Mazars, Thailand, IFRS, IFRS 17, IASB, Multi-currency groups
22 December 2022
Paragraph 14 of IFRS 17 requires sub-groups of contracts with similar risks that are managed together to be distinguished within a portfolio. The IFRS IC has decided that while foreign exchange risk is indeed one of the many risks to be considered, ‘similar risks’ does not mean ‘identical risks’. In other words, a portfolio could include contracts subject to different currency exchange rate risks, and the analysis of the nature and extent of the risks is a matter of judgment.
For the measurement of multi-currency contracts, the IFRS IC accepts that one or several currencies may be used. In the latter case, the IFRS IC observed that (i) paragraph 30 of IFRS 17 requires a group of contracts, including the contractual service margin, to be treated as a ‘monetary item’ for the purposes of IAS 21, and that (ii) the contractual service margin is a single contract margin: there are not several depending on the currency of the underlying flows. Consequently, the entity shall translate the cash flows and contractual service margin of a group of multi-currency contracts in accordance with IAS 21, considering the contractual service margin as a single amount.
The draft decision was widely supported by stakeholders and the application of this decision should therefore not be a problem.