International Accounting

Linked IFRS Standards must not be introduced in isolation

The International Accounting Standards Board (IASB) has proposed a solution in connection with the upcoming adoption of the new accounting standard for financial instruments (IFRS 9) which would resolve the existing controversy between the IASB and the insurance industry. One of the IASB’s proposals calls for IFRS 9 to be temporarily deferred for insurers, so that IFRS 9 and IFRS 4 (Phase II) can take effect simultaneously. GDV welcomes this proposal since the Standards IFRS 4 (Phase II) and IFRS 9 are closely interrelated.

The IASB’s proposal to temporarily postpone the mandatory effective date of the standard IFRS 9 “Financial Instruments” would allow insurers to await the outcome of the discussions concerning the revised standard IFRS 4 “Insurance Contracts” (Phase II). In that case, both standards could be introduced simultaneously. This would avoid unnecessary duplication of the implementation work, additional volatility in insurers’ financial statements and confusion by investors and other users of insurers’ financial statements. Currently IFRS 9 and IFRS 4 (Phase II) are due to take effect at different times, even though the implementation and application of those standards are closely related for insurers.

“Certainty is the highest priority for companies right now,” says Axel Wehling, member of the Executive Board of the German Insurance Association (GDV). “It is important for insurers that the linked standards are introduced at the same time. Otherwise, assets and liabilities would be accounted for inconsistently, which would distort the results presented in insurers’ financial statements. It is essential for the investments’ accounting to be aligned with the accounting of insurance liabilities and, in general, that insurers are in a position to realistically present their company’s financial position and performance.”

The GDV’s views in detail regarding the IASB’s proposals to overcome the current misalignment between the mandatory effective dates of IFRS 9 and IFRS 4 (Phase II) can be found in our comment letter on the IASB’ Exposure Draft ED/2015/11 of 9 December 2015.

The complete comment is available in the download section.


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Position Paper

Linked IFRS Standards must not be introduced in isolation

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