IFRS 17

VS.
IFRS 4
 COMPARABILITY
PRESENTATION IN THE STATEMENT
OF FINANCIAL POSITION
IFRS 4 IFRS 17 IFRS 4 IFRS 17 IFRS 4 IFRS 17
Profit recognition at Upfront revenue Accounting for Consistent Simplified presentation in
ASSETS
the start of the recognition is not insurance contracts accounting for all the statement of financial
Reinsurance
contract permitted. varies significantly insurance contracts. position of insurance
contract assets
Mandatory early between contract assets and
Deferred
recognition of companies. liabilities determined at
losses on onerous acquisition costs the portfolio level.
Revenue will reflect Value of business
contracts. ASSETS
Some companies the insurance
Revenue includes Revenue excludes acquired Reinsurance contract
present cash or coverage provided
premium and may any investment Premiums assets
deposits received as as it would be in any Insurance contract
include an component and receivable
revenue which other industry. assets
investment represents the Policy loans
differs from
component. reduction of the accounting practice
liabilities held as the in other industries. LIABILITIES LIABILITIES
entity provides Insurance Insurance
insurance service
and respective risk
INFORMATION contracts liabilities
Unearned
Contracts liabilities
Reinsurance
is released.. IFRS 4 IFRS 17
premiums contracts liabilities
Out-of-date information Current value
Reinsurance is Reinsurance is Claims payable
calculated on a net calculated Companies measure Companies will measure
basis. separately. insurance contracts their insurance Changes in Liability-
based on the value of
Insurance Revenue-
Change in value of Change in value of contracts based only on
Shown as a single line
market variables their investment the obligations created which would have
market variables in Profit & Loss but
goes through P&L. may go through
portfolios. separate lines for:
which includes: Release in Best
P&L or OCI. Companies do not Companies will provide Release from
Disclosures help Separation of provide consistent consistent information Estimate
expected out go
users understand components is
information about their about current and Assumption (BEL)
sources of profit. future profits. Release from
amounts in the required only if Release of
margins
insurer’s financial distinct. Many companies Companies will use margins through
embedded in
statements. provide alternative non- fewer non-GAAP CSM
GAAP measures to
assumptions
measures;
Discretion in Separation of
supplement IFRS 4 supplementary
determining components is information. information will enable
separation of required only if more meaningful
components distinct. comparisons.
 REINSURANCE CONTRACTS HELD- IFRS 4 IFRS 17

RECOVERY OF LOSSES ON UNDERLYING Insurance contract Revenue and profit

emergence will better
INSURANCE CONTACTS services now
reflect performance
include both
IFRS 4 IFRS 17 of the wide range of
insurance and
insurance products
The reinsurance Reinsurance contracts investment and the services they
contracts are held are accounted for services provide to customers
accounted for as using the general Allocating insurance
assets by the cedant model or the premium SCOPE EXCLUSION FROM IFRS 17 FOR acquisition cash flows
(covered person) as a allocation approach SOME CREDIT CARD CONTRACTS Accounting for to future renewal
separate contract only. IFRS 4 IFRS 17 assets and groups reduces the
from the covered liabilities before risk of groups
The manner of Permits an insurer Generally requires
insurance contract. In becoming onerous
calculating the to separate a loan IFRS 17 to be applied the related group
solely from
that regard, IFRS 4 contractual service component from to the whole contract of contracts is
acquisition expenses
requires those assets margin and the that transfers recognized.
an insurance paid relating to
to be impaired if fulfillment cash flows significant insurance
contract and apply future renewals
necessary. A are similar at one big risk.
IFRS 9 Financial Circumstances under The allocation is
reinsurance asset is exception: the CSM revised at each
Instruments or which separation is
impaired if: will exist to report a reporting period to
other IFRS permitted are
There is an loss as well as a reflect any changes in
Standards to the narrow compared to
objective evidence profit, whereas for assumptions that
loan component. IFRS 4.
that the cedant insurance contracts, determine the inputs
it would only depict to the method of
may not receive all
future profits. allocation used, until
the amounts due CONTRACTUAL SERVICE MARGIN
all contracts have
under the terms of ATTRIBUTABLE TO INVESTMENT- been added to the
the contract or RETURN SERVICE AND INVESTMENT- group.
An event has Loss that are related RELATED SERVICES Companies now need
reliably altered the to events that IFRS 4 IFRS 17 to assess each period
amounts that the happened in the Accounting policy Companies will choose the recoverability of
past may be taken to apply either a ‘period- insurance acquisition
cedant might choice for interim
to-period’ or ‘year-to-
into profit or loss reporting cash flow assets
receive from the date’ approach, allowing
immediately. usually on a more
reinsurer. greater opportunity for
consistency with current granular level than
practice and for applied today
subsidiaries to align
reporting with their
parent
 IFRS 4 IFRS 17
IFRS 4 IFRS 17
Applying the OCI Companies Variety of Consistent
option and risk applying both treatment accounting for all
mitigation option options together depending on type insurance
together will be able to of contract and contracts by all
achieve better entity companies.
matching in the interpretation. Estimates
income statement Estimates such as updated to reflect
Eligibility criteria Assessed on a discount rates for current market-
for VFA contract level long-duration based information.
instead of group contracts not Discount rate
level as some updated. reflects
companies had Discount rate characteristics of
interpreted based on the cash flows of
Companies will estimates does the contract.
Accounting for
be able to offset not reflect Measurement of
recovery of losses
losses on initial economic risks. insurance contract
on initial
recognition of Lack of reflects time value
recognition
direct insurance discounting for where significant
contracts based measurement of
on a prescribed some contracts
formula if they are TRANSITIONAL MODIFICATION AND RELIEFS
APPLICABILITY OF RISK MITIGATION OPTION covered by
IFRS 4 IFRS 17 reinsurance Transitional Modification:
Risk mitigation option Broader application of contracts held, On transition to IFRS 17, an entity applies IFRS
expanded to non- the risk mitigation 17 retrospectively to groups of insurance
reducing
derivative assets at option will lead to
accounting contracts, unless it is impracticable. In this case,
FVTPL and fewer accounting
mismatches mismatches the entity is permitted to choose between a
reinsurance contracts
If a company meets modified retrospective approach and the fair
held and extended to
the risk mitigation value approach.
provide relief option criteria before
prospectively from transition, it can now
the transition date apply the fair value
approach to the
related contracts at
transition
 OTHER AMENDMENTS
Full retrospective approach- as if IFRS Investment Component -
17 had always been applied. Clarification on the definition of
Modified retrospective approach- the
investment component, being an
entity achieves the closest outcome to
MEMBERS
amount repayable in all
retrospective application using
circumstances.
reasonable and supportable information
Liability for remaining coverage Laika Castro
and choosing from a list of available Jessa De Guzman
simplifications. and liability for incurred claims - Erika Galay

The CSM at transition can be based on Expanded definitions to include all Joan Laroya
Mai Flor Lofranco
fair value at transition. obligations arising from insurance Ana Rose Malijan
Jo April Taccad
In practice, using different approaches to contracts issued by an entity.
transition could result in significantly different
outcomes that will drive profit recognised in
future periods for contracts in force on
KEY FACT AND
transition. TOPIC
IMPACT
Transition date: beginning of annual
• 1 January 2023
reporting period immediately preceding date
effective date for
of initial application (1 January 2022) and only application of IFRS
one restated comparative period required. 17 and exemption
• Effective date from applying IFRS 9
• Companies have
EXPECTED RECOVERY OF ACQUISITION CASH just 18 months until
the transition date
FLOWS of 1 January 2022