THE IASB is to consult on a package of temporary measures to address issues arising from the application of the financial instruments standard before the new insurance contracts standard kicks in.
The move follows the introduction of IFRS 9 Financial Instruments, in July 2014, which has an effective date of 1 January 2018. The IASB said at the time that it would consider any potential challenges that arose should IFRS 9 be implemented before the new insurance contracts standard.
The latest confirmed measures will amend IFRS 4 Insurance Contracts to give companies whose business model is to predominantly issue insurance contracts the option to defer the effective date of IFRS 9 until 2021 – the ‘deferral approach’. It would also give insurers who implement IFRS 9 the option to remove from profit or loss some of the accounting mismatches and temporary volatility that may occur before the new insurance contracts standard is implemented – the ‘overlay approach’.
The insurance contracts standard is currently being thrashed out by the IASB and a final standard is expected to be issued in 2016.
An exposure draft outlining the measures is set to be published later this year for public consultation. If confirmed after the consultation, the measures will not affect companies that do not issue insurance contracts.
A recent survey suggested that half of Europe’s financial institutions were struggling to make the 2018 deadline.