IFRS 4 Insurance contracts 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.
Scope |
IFRS 4 applies to:
| The following are examples of contracts that are insurance contracts, if the transfer of insurance risk is significant:
| The following are examples of items that are not insurance contracts:
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Insurance accounting requirements |
Embedded derivatives | Unbundling of deposit components |
As an exception to the rules in IAS 39, an insurer need not separate, and measure at fair value, a policyholder’s option to surrender an insurance contract for a fixed amount (or for an amount based on a fixed amount and an interest rate), and if the exercise price differs from the carrying amount of the host insurance liability. However, the requirement in IAS 39 does apply to a put option or cash surrender option embedded in an insurance contract if the surrender value varies in response to the change in a financial variable (such as an equity or commodity price or index), or a non-financial variable that is not specific to a party to the contract. Furthermore, that requirement also applies if the holder’s ability to exercise a put option or cash surrender option is triggered by a change in such a variable (for example, a put option that can be exercised if a stock market index reaches a specified level). | Some insurance contracts contain both an insurance component and a deposit component. In some cases, an insurer is required or permitted to unbundle those components. Further guidance is provided in paragraphs 10 – 12 of IFRS 4.
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Recognition and measurement Temporary exemption from some other IFRS | |
Paragraphs 10 – 12 of IAS 8 specify criteria for an entity to use in developing an accounting policy if no Standard applies specifically to an item. IFRS 4 exempts an insurer from applying those criteria to its accounting policies for:
IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts | Nevertheless, IFRS 4 does not exempt an insurer from some implications of the criteria in paragraphs 10 – 12 of IAS 8. Specifically, an insurer:
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Liability adequacy test | Changes in accounting policies |
At each reporting date, an insurer shall assess whether the carrying amount of an insurance liability is sufficient by comparing its carrying amount (less related deferred acquisition costs and related intangible assets) with the current estimates of future cash flows under the insurance contracts. Any deficiency is recognised in the profit or loss. IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts
| An insurer may change accounting policies for insurance contracts if, and only if the change makes the financial statements more relevant to the economic decision making needs of users without loss of reliability or relevance. Relevance and reliability is judged by the criteria in IAS 8. IFRS 4 provides more information on the following specific issues:
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Discretionary participation features |
The issuer of an insurance contract with a discretionary participation feature and a guaranteed element may but need not choose to recognise the elements separately with the following consequences:
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IFRS | Disclosure questions |
IFRS 4.36 | Has the insurer disclosed information that identifies and explains the amounts in its financial statements arising from insurance contracts? |
IFRS 4.37 | Has the insurer disclosed:
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IFRS 4.38 | Has the insurer disclosed information to enable users of its financial statements to evaluate the nature and extent of risks arising from insurance contracts? |
IFRS 4.39 IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts IFRS 4 Insurance contracts | Has the insurer disclosed:
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IFRS 4,39A | Has the insurer disclosed either (a) or (b) to comply with paragraph 39(c)(i):
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