Question 1

What is IFRS 17?

Accepted Answer

IFRS 17 Insurance Contracts is an international financial reporting standard that establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts. It replaced IFRS 4 and became effective on 1 January 2023. The standard aims to ensure that entities provide relevant information that faithfully represents insurance contracts.

Question 2

What is the Contractual Service Margin (CSM) in IFRS 17?

Accepted Answer

The Contractual Service Margin (CSM) is a component of the carrying amount of an insurance contract that represents the unearned profit the entity will recognise as it provides insurance contract services in the future. It is measured on initial recognition so that no income or expenses arise from the initial recognition of fulfilment cash flows, any cash flows arising at that date, and the derecognition of any previously recognised assets or liabilities.

Question 3

What is the Premium Allocation Approach (PAA) under IFRS 17?

Accepted Answer

The Premium Allocation Approach (PAA) is a simplified measurement model under IFRS 17 that can be used when the coverage period of each contract in a group is one year or less, or when it would produce results not materially different from the general measurement model. The PAA is widely used in general insurance (property and casualty) where policy periods are typically 12 months.

Question 4

What are the measurement models in IFRS 17?

Accepted Answer

IFRS 17 includes three measurement models: (1) the Building Block Approach (BBA), also called the General Measurement Model, for most insurance contracts; (2) the Variable Fee Approach (VFA) for insurance contracts with direct participation features; and (3) the Premium Allocation Approach (PAA), a simplified model for short-duration contracts.

Question 5

What are fulfilment cash flows under IFRS 17?

Accepted Answer

Fulfilment cash flows represent the current estimate of the present value of the future cash flows that will arise as the entity fulfils insurance contracts. They comprise three elements: estimates of future cash flows, an adjustment to reflect the time value of money and the financial risks (discount rates), and a risk adjustment for non-financial risk.

Question 6

Who needs to apply IFRS 17?

Accepted Answer

IFRS 17 applies to entities that issue insurance contracts (including reinsurance contracts), hold reinsurance contracts, or issue investment contracts with discretionary participation features (provided they also issue insurance contracts). This includes insurance companies, reinsurers, and any entity with contracts that transfer significant insurance risk.

Question 7

Is Learn17 affiliated with the IFRS Foundation?

Accepted Answer

No. Learn17.com is an independent educational resource and is not affiliated with, endorsed by, or associated with the IFRS Foundation or the International Accounting Standards Board (IASB). For the official authoritative standard text, users should visit the IFRS Foundation at ifrs.org.

Learn IFRS 17Insurance Contracts

Learn IFRS 17
Insurance Contracts