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An entity shall apply this PFRS to:
a. insurance contracts, including reinsurance contracts, it issues
b. reins. contracts it holds; and investment contracts with discretionary participation features it issues, provided the entity issues ins. contracts
Some contracts meet the definition of an ins. contract but have as their primary purpose the provision of services for a fixed fee; such issued
contracts are in the scope of the std., unless an entity chooses to apply to them PFRS 15 and provided the ff. conditions are met:
a. the entity does not reflect an assessment of the risk assoc. with an individual customer in setting the price of the contract with that customer
b. the contract compensates the customer by providing a service, rather than by making cash payments to the customer
c. the ins. risk transferred by the contract arises from the customers use of services rather than from uncertainty over the cost of services

Insurance contract
one party (the issuer) accepts significant ins. risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified
uncertain future event (the insured event) adversely affects the policyholder
An entity shall:
a. Apply PFRS 9 to determine whether there is an embedded derivative to be separated and, if there is, how to account for such a derivative
b. Separate from a host ins. contract an investment component if, and only if, that investment component is distinct; the entity shall apply PFRS 9
to account for the separated investment component
After performing the above steps, separate any promises to transfer distinct non-ins. goods or services; such promises are acct. under PFRS 15
This PFRS requires entities to identify portfolios of ins. contracts, which comprises contracts that are subject to similar risks and managed together;
each portfolio of ins. contracts issues shall be divided into a minimum of:
a. group of contracts that are onerous at initial recognition, if any
b. group of contracts that at initial recognition have no significant possibility of becoming onerous subsequently, if any
c. group of the remaining contracts in the portfolio, if any

An entity is not permitted to include contracts issued more than one year apart in the same group
If contracts within a portfolio would fall into different groups only because law or regulation specifically constrains the entity's practical ability to
set a different price or level of benefits for policyholders with different characteristics, the entity may include those contracts in the same group
An entity shall recognize a group of ins. contracts it issues from the earliest of the following:
a. the beginning of the coverage period of the group of contracts
b. the date when the first payment from a policyholder in the group becomes due
c. for a group of onerous contracts, when the group becomes onerous
On initial recognition, an entity shall measure a group of ins. contracts at the total of:
a. the fulfilment CF (FCF), which comprise:
i. estimates of future CF
The discount rates applied to the estimate of CF shall:
a. reflect the time value of money (TVM), the characteristics of the CF and the liquidity characteristics of the ins. contracts
b. be consistent with observable current market prices (if any) of those fin. instruments whose cash flow characteristics are consistent
with those of the ins. contracts
c. exclude the effect of factors that influence such observable market prices but do not affect the future CF of the ins. contracts
ii. an adjustment to reflect the time value of money (TVM) and the fin. risks associated with the future CF; and
iii. a risk adjustment for non-fin. risk
The estimate of the present value of the future CF is adjusted to reflect the compensation that the entity requires for bearing the
uncertainty about the amount and timing of future CF that arises from non-fin. risk
b. the contractual service margin (CSM)
represents the unearned profit of the group of ins. contracts that the entity will recognize as it provides services in the future
measured on initial recognition of a group of ins. contracts at an amount that, unless the group of contracts is onerous, results in no income
or expenses arising from:
i. the initial recognition of an amount for the FCF
ii. the derecognition at that date of any asset or liab recognized for ins. acquisition CF
iii. any CF arising from the contracts in the group at that date

On subsequent measurement, the CA of a group of ins. contracts at the end of each reporting period shall be the sum of:
a. the liab for remaining coverage comprising:
i. the FCF related to future services
ii. the CSM of the group at that date
b. the liab for incurred claims, comprising the FCF related to past service allocated to the group at that date
An ins. contract is onerous at initial recognition if the total of the FCF, any previously recognized acquisition CF and any CF arising from the
contract at that date is a net outflow
an entity shall recognize a loss in P/L for the net outflow, resulting in the CA of the liab for the group being equal to the FCF and the CSM of the
group being zero
on subsequent measurement that excess shall be recognized in P/L; the CSM cannot increase and no revenue can be recognized, until the
onerous amount previously recognized has been reversed in P/L as part of a service expense
An entity may simplify the measurement of the liab for remaining coverage of a group of ins. contracts using the Premium Allocation Approach
(PAA) on the condition that, at the inception of the group:
a. the entity reasonably expects that this will be a reasonable approximation of the general model
b. the coverage period of each contract in the group is one year or less
where, at the inception of the group, an entity expects significant variances in the FCF during the period before a claim is incurred, they are not
eligible to apply the PAA
An investment contract with a DPF is a fin. instrument and it does not include a transfer of significant ins. risk. It is in the scope of the std. only if
the issuer also issues ins. contracts
In estimating the present value of future expected CF for reins. contracts, entities use assumptions consistent with those used for related direct
ins. contracts; estimates include the risk of reinsurers non-performance
the risk adjustment for non-fin. risk is estimated to represent the transfer of risk from the holder of the reins. contract to the reinsurer
on initial recognition, the CSM is determined similarly to that of direct ins. contracts issued, except that the CSM represents net G/L on
purchasing reins.; this net G/L is deferred, unless the net loss relates to events that occurred before purchasing a reins. contract
subsequently, reins. contracts held are accounted similarly to ins. contracts under the general model; changes in reinsurers risk of non-
performance are reflected in P/L, and do not adjust the CSM
If the terms of an ins. contract are modified, an entity shall derecognize the original contract and recognize the modified contract as a new
contract if there is a substantive modification, based on meeting any of the specified criteria
The modification is substantive if any of the following conditions are satisfied:
a. if, had the modified terms been included at contracts inception, this would have led to:
i. exclusion from the Std.s scope
ii. unbundling of different embedded derivatives
iii. redefinition of the contract boundary
iv. the reallocation to a different group of contracts
b. if the original contract met the def. of a direct par ins. contracts, but the modified contract no longer meets that definition, or vice versa
c. the entity originally applied the PAA, but the contracts modifications made it no longer eligible for it
An entity shall derecognize an ins. contract when it is extinguished, or if any of the conditions of a substantive modification of ins. contract are met
An entity shall present separately in the SFP the CA of groups of:
a. ins. contracts issued that are assets
b. ins. contracts issued that are liab
c. reins. contracts held that are assets
d. reins. contracts held that are liab
An entity shall disaggregate the amounts recognized in the statement(s) of fin. performance into:
a. an ins. service result, comprising ins. revenue and ins. service expenses
b. ins. finance income or expenses
An entity shall present in P/L revenue arising from the groups of ins. contracts issued, and ins. service expenses arising from a group of ins.
contracts it issues, comprising incurred claims and other incurred ins. service expenses
Ins. finance income or expenses comprises the change in the CA of the group of ins. contracts arising from:
a. the effect of the time value of money and changes in the time value of money
b. the effect of changes in assumptions that relate to fin. risk
c. excluding any such changes for groups of ins. contracts with direct participating ins. contracts that would instead adjust the CSM
An entity has an accounting policy choice between including all of ins. finance income or expense for the period in P/L, or disaggregating it
between an amount presented in P/L and an amount presented in OCI
o General Model
presenting in P/L an amount determined by a systematic allocation of the expected total ins. finance income or expenses over the
duration of the group of contracts
on derecognition of the groups amounts remaining in OCI are reclassified to P/L
o Variable Fee Approach
presenting in P/L as ins. finance income or expenses an amount that eliminates the accounting mismatches with the finance income or
expenses arising on the underlying items
on derecognition of the groups, the amounts previously recognized in OCI remain there