Investor Presentaiton
Appendix C
Recent IFRIC agenda decisions
Meeting date
September
2022
Issue discussed by the Committee
IFRS 17 and IAS 21 - Multi-currency
groups of insurance contracts:
Does an entity consider currency
exchange rate risks when identifying
portfolios of insurance contracts?
How does an entity measure a group
of insurance contracts that generate
cash flows in more than one
currency?
Summary of the Committee's conclusion on the issue
Identifying portfolios of insurance contracts
A portfolio of insurance contracts comprises contracts subject to similar
risks and managed together. When identifying portfolios, the Committee
concluded that an entity is required to consider all risks, including currency
exchange rate risks, because IFRS 17 does not specify any particular types of
risk when referring to "similar risks". However, a portfolio could include
contracts subject to different currency exchange rate risks because "similar
risks" does not mean "identical risks".
Measuring a multi-currency group of insurance contracts
When measuring a group of insurance contracts, the Committee observed
that the entity would:
(a) apply all the measurement requirements in IFRS 17 to the group,
including the requirement to treat the group (including the
contractual service margin ("CSM")) as a monetary item;
(b) apply IAS 21 and translate at the end of the reporting period the
carrying amount of the group (including the CSM) at the closing
rate(s); and
(c) use its judgement to develop and apply an accounting policy that
determines on initial recognition the currency or currencies in
which the group (including the CSM) is denominated.
The entity develops an accounting policy on currency denomination that
results in information that is relevant and reliable and is applied
consistently, based on its specific circumstances and the terms of the
contracts in the group. It cannot simply presume that the CSM is
denominated in its functional currency.
The entity's accounting policy determines which effects of changes in
exchange rates are accounted for applying IAS 21 and which are accounted
for applying IFRS 17.
A single-currency denomination treats:
(a) changes in exchange rates between the currency of the cash flows
and the currency of the group of contracts as changes in financial
risk under IFRS 17; and
(b) changes in exchange rates between the currency of the group of
contracts and the functional currency as exchange differences
under IAS 21.
A multi-currency denomination treats all changes in exchange rates as
exchange differences under IAS 21. As there is a single CSM for the group of
contracts in applying IFRS 17, under a multi-currency denomination, the
entity would:
(a) assess whether the group is onerous considering the CSM as a
single amount;
(b) prevent the carrying amount of the CSM being negative by
recognising a loss when necessary; and
(c) determine the amount of the CSM to recognise in profit or loss by
applying a single method of determining the coverage units
provided in the current period and expected to be provided in the
future to the amounts denominated in the multiple currencies.
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