What is the objective of IFRS 4?

The objective of IFRS 4 is to specify the financial reporting for insurance contracts by any entity that issues such contracts (described in IFRS 4 as an insurer).

Why did IFRS 17 replace IFRS 4?

IFRS 17 replaces IFRS 4 Insurance Contracts. When introduced in 2004, IFRS 4—an interim Standard—was meant to limit changes to existing insurance accounting practices. Hence, IFRS 4 has allowed insurers to use different accounting policies to measure similar insurance contracts they write in different countries.

What is the main difference between IFRS 4 and IFRS 17?

The key difference between IFRS 17 and IFRS 4 is the consistency of application of accounting treatments to areas such as revenue recognition and liability valuation. Under IFRS 4, entities were free to derive their own interpretations of revenue recognition and calculation of reserves.

Is IFRS 4 still applicable?

IFRS 4 was issued in March 2004 and applies to annual periods beginning on or after 1 January 2005. IFRS 4 will be replaced by IFRS 17 as of 1 January 2023.

What are the 4 principles of IFRS?

IFRS requires that financial statements be prepared using four basic principles: clarity, relevance, reliability, and comparability.

What is an insurance contract called?

An insurance policy – also called a contract of adhesion (yeah, like glue) because you agree to stick to the contract terms and conditions – is an agreement between you and your insurer outlining the coverage they’ll provide you, others in the policy, your stuff, and your place.

What are the changes in IFRS 17?

❹ What changes? IFRS 17 requires a company to measure insurance contracts using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to insurance contracts. This requirement will provide transparent reporting about a company’s financial position and risk.

Does IFRS 17 replace IFRS 4?

IFRS 17 replaces IFRS 4, which currently permits a wide variety of practices. IFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features.

Which IFRS is for insurance contracts?

IFRS 4 applies to all insurance contracts (including reinsurance contracts) that an entity issues and to reinsurance contracts that it holds, except for specified contracts covered by other Standards.

WHO issued IFRS?

the International Accounting Standards Board
The IFRS are issued by the International Accounting Standards Board (IASB).

What are the 4 principles of GAAP?

The four basic constraints associated with GAAP include objectivity, materiality, consistency and prudence.

What may be used to modify the terms of an insurance contract?

Policy riders are amendments to an existing policy. The rider contains the amended terms and becomes part of the original insurance contract. An insurer will use a rider any time that the terms of coverage change under an insureds policy.

Why was IFRS 4 issued to insurance companies?

A com­pre­hen­sive project on insurance contracts is under way. The Board issued IFRS 4 because it saw an urgent need for improved dis­clo­sures for insurance contracts, and some im­prove­ments to recog­ni­tion and mea­sure­ment practices, in time for the adoption of IFRS by listed companies through­out Europe and elsewhere in 2005.

How are insurance contracts exempt from IFRS requirements?

The IFRS exempts an insurer tem­porar­ily (until com­ple­tion of Phase II of the Insurance Project) from some re­quire­ments of other IFRSs, including the re­quire­ment to consider IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors in selecting accounting policies for insurance contracts. However, the standard: [IFRS 4.14]

Is there an impairment test in IFRS 4.14?

However, the standard: [IFRS 4.14] prohibits provisions for possible claims under contracts that are not in existence at the reporting date (such as catastrophe and equalisation provisions) requires a test for the adequacy of recognised insurance liabilities and an impairment test for reinsurance assets

When does the deferral of IFRS 4 expire?

An entity choosing to apply the deferral approach does so for annual periods beginning on or after 1 January 2018. The effective date of IFRS 17, which will be replacing IFRS 4, is now 1 January 2023; the fixed expiry date for the temporary exemption in IFRS 4 from applying IFRS 9 has been deferred to 1 January 2023.