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Modified retrospective approach

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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
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Aggregation disaggregation and materiality

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Aggregation disaggregation and materiality are cornerstones of financial reporting using IFRS. Here is a summary of the financial reporting items that include (mostly) disclosure requirements that relate to these cornerstones. See also Aggregation for an overview of general financial reporting rules in that respect. Aggregation disaggregation and materiality

Fair value measurement

Present additional line items (including by disaggregating the line items listed in IAS 1 54), headings and subtotals in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position. This may require additional line items when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to Read more

Accounting Policies to First IFRS Financial statements

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Accounting Policies to First IFRS Financial statements – An entity must use the same accounting policies in its opening IFRS statement of financial position and throughout all periods presented in its first IFRS financial statements. Those accounting policies must comply with each IFRSs effective at the end of its first IFRS reporting period, unless there is a mandatory exception to retrospective application or an optional exemption from the requirements of IFRSs.

[IFRS 1, paras 7 – 9]Accounting Policies to First IFRS Financial statements

Note that:

  • An entity may apply a new IFRS that is not yet mandatory if that IFRSs permits early application.
  • The transitional provisions in IFRSs do not apply to a first-time adopter’s transition to IFRSs.

Mandatory Exceptions to Retrospective Application Read more

Main FS Statements Insurance contracts

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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 includeMain FS Statements Insurance contracts 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

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Sensitivity analysis to market risk

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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

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Key differences between GM and VFA Insurance

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Key differences between GM and VFA Insurance – The Variable Fee Approach (‘VFA’) is a modification of the General Model. The General Model is applied to insurance contracts without participation features or to insurance contracts with participation features that fail the Variable fee scope test. Thus, the VFA is applied to insurance contracts with direct participation features that contain the following conditions at initial recognition:

  1. the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
  2. the entity expects to pay to the policyholder an amount equal to a substantial share of the returns from the underlying items; and
  3. a substantial proportion of the cash flows the entity expects
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Insurances Classification and Measurement

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Insurances Classification and Measurement – Introduction

(first part from https://en.wikipedia.org/wiki/Insurance) Insurances Classification and Measurement

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.Insurances Classification and Measurement

An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the event of a covered loss.

The loss Read more

Disclosure requirements IFRS 4 and IFRS 17

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Disclosure requirements IFRS 4 and IFRS 17 – Explanation of recognized amounts from IFRS 4 to IFRS 17

1 Introduction Disclosure requirements IFRS 4 and IFRS 17

[IFRS 17 (98), IFRS 17 (93)-(96)]

Disclosure requirements IFRS 4 and IFRS 17IFRS 4 requires an entity to disclose information that identifies and explains the amounts in its financial statements arising from insurance contracts. In order to comply with this objective, IFRS 4 outlines what should be disclosed regarding reconciliations, policies, methods and processes but provides limited guidance on how these disclosure requirements should be met.

IFRS 17 requirements are much more extensive. It requires the entity to provide specific reconciliations showing how the net carrying amounts of insurance contracts changed during the Read more

Practical implications of IFRS 17 transition choices

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Practical implications of IFRS 17 transition choices – The choice between the modified retrospective approach and the fair value approach on transition will impact shareholders’ equity on transition and the release of profit from the insurance contracts in force after the transition. It is also likely to affect operational complexity and the cost of IFRS 17 implementation.

In addition, some profits from insurance contracts might not be recognised at all in profit or loss (that is, they would not have been recognized in profit or loss under IFRS 4 and will be recognized as an adjustment to equity on transition to IFRS 17), while other profits might be recognized in profit or loss twice (that is, they Read more

Transition to IFRS 17 Insurance contracts

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Transition to IFRS 17 Insurance contractsTransition to IFRS 17 Insurance contracts – IFRS 17 should be applied for annual reporting periods beginning on or after 1 January 2021. FRS 17 supersedes IFRS 4 [IFRS 17 C34]. Early adoption is permitted if the entity applies IFRS 9 and IFRS 15 not later than on the date of initial application of IFRS 17.

1 January 2021 is the date of initial application of IFRS 17 unless an entity early adopts IFRS 17 [IFRS 17 C1]. The transition date is the beginning of the reporting period immediately preceding the date of initial application. Therefore, if an entity adopts on 1 January 2021, the transition date is 1 January 2020 [IFRS 17 C2Read more