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
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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
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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,
B120 – B127


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

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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:


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

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Management of credit risk for financial instruments

Financial institutions (banks, insurance companies, investment entities) should have a management process in place to identify, measure, monitor and control credit risk as well as to determine that they hold adequate capital against these risks and that they are adequately compensated for risks incurred.

The sound practices should specifically address the following areas:

  1. establishing an appropriate credit risk environment;
  2. operating under a sound credit-granting process;
  3. maintaining an appropriate credit administration, measurement, and monitoring process; and
  4. ensuring adequate controls over credit risk.

Although specific credit risk management practices may differ among financial institutions depending upon the nature and complexity of their credit activities, a comprehensive credit risk management program will address these four areas. These practices should also be applied Read more