IFRS 17 to provide insurers with IFRS 9

When first applying IFRS 17 – Insurance Contracts, for financial periods commencing on or after 1 January 2023, insurance entities are required to present one year of comparative information (for the 2022 transition period).

Keywords: Mazars, Thailand, IFRS, IFRS 17, IFRS 9, IAS 39, IASB, EFRAG, Insurance, Financial Instruments

25 February 2022

In contrast, IFRS 9 does not require comparative information to be presented at the transition date. Entities may elect to present comparative information (IFRS 9.7.2.15), but only for financial instruments that remain on the balance sheet after the date of initial application, i.e. 1 January 2023 for insurance entities. Financial instruments that have already been derecognised at the date of initial application (1 January 2023) must be accounted for in accordance with IAS 39 in the 2022 financial period.

For many insurers, who will be applying both IFRS 9 (to their assets) and IFRS 17 (to their liabilities) for the first time at 1 January 2023, it is important to align the two standards from 2022 onwards in order to avoid accounting mismatches.

To address insurers’ concerns, the International Accounting Standards Board (IASB) published an amendment to IFRS 17 on 9 December 2021, permitting an optional classification overlay so that comparative information can be presented as if IFRS 9 had been applied. The rules on applying this option are quite flexible, as they permit (i) an instrument-by-instrument approach; (ii) restatement of more than one comparative period; and (iii) a choice of whether to use expected or incurred credit losses when determining loss allowances.

The European Financial Reporting Advisory Group (EFRAG) was strongly in favour of the amendment in its draft endorsement advice. Unsurprisingly, then, final adoption of the amendment by the European Union is expected in early 2022.