IFRS 17 Insurance Contracts |

General model IFRS 17 Insurance contracts

In terms of recognition of items, the general model IFRS 17 Insurance contracts introduces two key terms: contractual service margin and fulfillment cash flows. General model IFRS 17 Insurance contracts

The contractual service margin is calculated at the start of the contract as the difference between the present value of the expected cash flows (plus a risk adjustment) and the present value of expected premiums. In its simplest form, the contractual service margin represents the overall profit expected on the insurance contract. General model IFRS 17 Insurance contracts

The fulfillment cash flows represent the estimate of the present value of the future cash outflows less the present value of the future cash inflows that will arise as the entity … Read more

Natural disasters – Insurance recoveries and reimbursements

An entity may experience a loss related to a natural disaster either through the impairment of an asset or the incurrence of a liability. For example, as a result of damage from a natural disaster, an entity may determine that an item of property, plant and equipment is impaired in accordance with IAS 36 Impairment of assets or that a receivable from a customer is impaired in accordance with IFRS 9 Financial instruments (or IAS 39, if still applicable). Alternatively, an entity may incur costs to repair a damaged facility or determine that it has a liability to repair an environmental damage in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Natural disasters – Insurance recoveries and Read more

Equity reserves

Equity is defined as follows: The residual interest in the assets of the enterprise after deducting all of its liabilities.

Equity consists of several components such as Share capital, Treasury shares (issued shares held by the entity in a buyback), Share premium account (or Additional paid-in capital), Retained earnings and Non-controlling interest. But there is more…. Equity reserves – separated equity components

  • Translation reserve (foreign currency translation reserve), that arises from the change in FX rates from translation of foreign operating entities (in other than the consolidationEquity reserves Equity reserves Equity reserves currency) from reporting period to reporting period, When realised the result is reclassified from OCI (and translation reserve) to profit or loss,
  • Cash flow hedge reserve (hedging reserve). Hedging reserves arise as a
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Modified retrospective approach

Applying the modified retrospective approach, an entity should achieve the closest possible outcome to the retrospective application using reasonable and supportable information without undue cost or effort. An entity should maximise the use of information required for the retrospective application, and it is permitted to use each modification only if there is no reasonable and supportable information available, without undue cost or effort, to apply a retrospective approach.

Applying the modified retrospective approach, the simplifications listed below are available; an entity should use simplifications only where it does not have reasonable and supportable information, without undue cost or effort, as required by the full retrospective approach:

  1. assessments at the date of initial recognition of groups of insurance contracts;
  2. contractual service
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Main FS Statements Insurance contracts

These examples of the main Financial Statements statements demonstrate the requirements in respect of presentation and disclosure according to IFRS 17 Insurance contracts. They also includeIFRS 17 Insurance contracts Contents the requirements (introduced or amended) in respect of presentation and disclosure according to IFRS 9 Financial instruments and IFRS 7 Financial instruments: Disclosures.

It is prepared for illustrative purposes only and should be used in conjunction with the relevant financial reporting standards and any other reporting pronouncements and legislation applicable in specific jurisdictions. Main FS Statements Insurance contracts

 

Presentation of insurance service result Main FS Statements Insurance contracts

 

IFRS 17 83,
85,
B120 – B127

Clarifications:

Insurance revenue reflects the consideration to which the insurer expects to be entitled in exchange

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Sensitivity analysis to market risk

Companies are required to report both qualitatively and quantitatively on their risk management strategies and the internal metrics they use for the calculation and management of risk arising from financial instruments.

IFRS 7 breaks down the risk arising from financial instruments into three broad categories: market risk, credit risk and liquidity risk.

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the company’s income or the value of its financial instruments. Example disclosures are as follows:

IFRS Link

Explanation Sensitivity analysis to market risk

IFRS 17 128

Entities are required to disclose a sensitivity analysis to demonstrate the impact of reasonably possible changes in risk variables at

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