Gayos, Karina K.

A4A-ACCSPIN

-SCOPE OF IFRS 17-

The video discussed the scope of IFRS 17, definition of an insurance contract, IFRS 17
current measurement model, exclusions, reinsurance contracts, measurement and changes to
the balance sheet and performance.

The scope of IFRS 17 is (a) insurance contracts, including reinsurance contracts, it

issues; (b) reinsurance contracts it holds; and (c) investment contracts with discretionary
participation features it issues, provided the entity also issues insurance contracts.

However, IFRS 17 shall not apply to: (a) warranties provided by a manufacturer, dealer
or retailer in connection with the sale of its goods or services to a customer (b) employers’
assets and liabilities from employee benefit plans and retirement benefit obligations reported by
defined benefit retirement plans (c) contractual rights or contractual obligations contingent on
the futures of, or the right to use, a non-financial item (d) residual value guarantees provided by
a manufacturer, dealer or retailer and a lessee’s residual value guarantees when they are
embedded in lease (e) financial guarantee contracts, unless the issuer has previously asserted
explicitly that it regards such contracts as insurance contracts and has used accounting
applicable to insurance contracts (f) contingent consideration payable or receivable in a
business combination and (g) insurance contracts in which the entity is the policyholder, unless
those contracts are reinsurance contracts held (see paragraph 3(b).

Appendix A of IFRS 17 defines insurance contract as a contract under which one party
(the issuer) accepts significant insurance 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.

Appendix A of IFRS 17 defines reinsurance contract as an insurance contract issued by

one entity (the reinsurer) to compensate another entity for claims arising from one or more
insurance contracts issued by that other entity (underlying contracts).

The measurement for initial recognition (paragraphsB36–B95) of insurance contract

liabilities was also elaborated in the video. Moreover, the components of the liability were
introduced such as the future cash flows (FCF), risk adjustment, and contractual service margin
(CSM). That on initial recognition, the entity shall measure the insurance liabilities on the total of
FCF and CSM.

The subsequent measurement shall be the sum of the liability for remaining coverage
and the liability for incurred claims. Liability for remaining coverage shall comprise of the
fulfillment cash flows related to future service allocated and the contractual service margin of the
group at that date. Moreover, the liability for incurred claims shall comprise of fulfillment cash
flows related to past service allocated to the group at that date.

An entity shall present separately in the statement of financial position the carrying
amount of group of: insurance and reinsurance contracts that are assets, and insurance and
reinsurance contracts issued that are liabilities.

Recognition and presentation in the statement(s) of financial performance (paragraphs

B120–B136) says that the entity is not required to disaggregate the change in the risk
adjustment for non-financial risk between the insurance service result and insurance finance
income or expense. However, is he does not, it shall include the entire change in the risk
adjustment for non-financial risk as part of the insurance service result.