2018年-普华永道全球_Transition_Resource_Group_debates_IFRS_17_implementation_issues_-_May_2018_11页_463kb

IFRS 17 Implementation Summary

Core Content

The document outlines the discussions held by the Transition Resource Group (TRG) for IFRS 17 Insurance Contracts during its second meeting on 2 May 2018. It provides insights into key implementation issues and the perspectives of TRG members and IASB staff on these matters. The TRG is a public forum established by the IASB to facilitate stakeholder input and provide feedback on the implementation of IFRS 17.

Main Issues and Key Points

1. Combination of Insurance Contracts

• Key Discussion: The TRG emphasized that the analysis for combination should align with the separation analysis from the February meeting. Factors such as interdependency of risks, lapse of components, and pricing independence are important.
• Staff View: A discount or simultaneous issuance is not sufficient to combine contracts. The risk adjustment is based on the entity’s compensation for non-financial risks.
• PwC Observation: TRG members agree that the guidance in IFRS 17 is more about combination than separation, and the existence of a discount alone is not determinative of combination.

2. Risk Adjustment for Non-Financial Risk in a Group of Entities

• Key Discussion: The question is whether the risk adjustment should reflect group-level risk diversification. Some members suggested that the risk adjustment at the consolidated level could differ from the sum of the subsidiaries' adjustments.
• Staff View: The risk adjustment is determined at the level where the entity considers the compensation for non-financial risk, not necessarily the group level.
• PwC Observation: While some members accept the staff view, there is no consensus on whether the risk adjustment should be different at the group level.

3. Cash Flows Within the Contract Boundary

• Key Discussion: Two main issues were addressed:
  • Interpretation of the "practical ability to set a price at a future date" requirement.
  • Determination of the contract boundary for contracts with options to add coverage.
• Staff View: If the option price is fixed at inception, cash flows are within the boundary. If not, cash flows after the option is exercised are included in the initial measurement.
• PwC Observation: Entities must determine whether a contract with an option is a single contract or two separate ones. The economic substance of the option is crucial in this analysis.

4. Boundary of Reinsurance Contracts with Repricing Mechanisms

• Key Discussion: The TRG considered how the boundary of reinsurance contracts is affected by the reinsurer's ability to reprice.
• Staff View: The cedant has a substantive obligation to pay premiums for the full term unless the reinsurer exercises its repricing right.
• PwC Observation: The fact pattern discussed is narrow and not commonly observed in practice.

5. Determining the Quantity of Benefits for Identifying Coverage Units

• Key Discussion: The TRG debated the definition of "quantity of benefits" in IFRS 17, which is critical for the recognition of the Contractual Service Margin (CSM).
• Staff View: The quantity of benefits should reflect the expected benefits received by the policyholder, not the cost to the entity.
• PwC Observation: Determining the quantity of benefits is a matter of judgment, not policy choice. Methods such as expected claims or maximum contractual cover can be used, provided they are reasonable.

6. Implementation Challenges Outreach Report

• Key Discussion: The TRG identified three major implementation challenges:
  • Presentation of groups of insurance contracts in the financial position.
  • Premium allocation approach (PAA) for premiums received.
  • Subsequent treatment of insurance contracts acquired in the settlement period.
• Staff View: The outreach report includes technical challenges and system development costs. Examples were provided to illustrate the application of PAA.
• PwC Observation: These challenges are among the top three faced by TRG members in their implementation projects. Further clarity is needed on the implementation impact.

Summary of Anticipated Next Steps

Conclusion

The TRG meeting focused on clarifying key implementation issues of IFRS 17, particularly regarding the combination of contracts, risk adjustment, cash flows, reinsurance boundaries, and quantity of benefits. The discussions highlighted the importance of consistent application of the Conceptual Framework, careful judgment, and the need for further guidance from the IASB. While some issues were resolved, others require further consideration or potential editorial changes. The TRG will not issue guidance, and the IASB will determine the appropriate actions based on stakeholder input.