IFRS Newsletter

15 Pages·2015·0.83 MB·English

Issue 47, July 2015
IFR S LSWEN RETE
INSURANCE
Amending IFRS 4 will
allow insurers to address
much of the temporary
volatility and accounting
mismatches in proft or
loss when implementing
IFRS 9. However, other

issues still exist.
Joachim Kölschbach,
KPMG’s global IFRS
insurance leader MOVING TOWARDS INTERNATIONAL
INSURANCE ACCOUNTING
This edition of IFRS Newsletter: Insurance highlights the IASB’s
discussions in July 2015 on its insurance contracts project.
Highlights
Addressing the consequences of different effective dates
l    The IASB discussed the accounting consequences of the different effective dates of
IFRS 9 Financial Instruments and the forthcoming insurance contracts standard.
l    The discussion focused on temporary volatility and accounting mismatches in proft or loss.
l    The IASB considered the following three options to address these consequences:
–    using the existing options under IFRS 4 Insurance Contracts;
–    amending IFRS 4; or
–    deferring the effective date of IFRS 9 in some circumstances.
l    The IASB tentatively decided to amend IFRS 4 to permit an entity to remove the impact of
applying IFRS 9 from proft or loss, subject to certain limitations.
l    The IASB will discuss further details of the decision, and whether to allow a deferral of the effective
date of IFRS 9, in September.
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RESPONDING TO CONCERNS OVER ACCOUNTING
CONSEQUENCES
What happened in July 2015?
The story so far …
Atf er several months o f discussions, the IA BS reached an
hT e current phase o f the insurance proej ct aw s launched important decision on the interaction betew en IFR S 4 and
in May 200,7 hw en the IA BS published a discussion paper, IFR 9 �S in uJ ly.
Preliminary Views on Insurance Contracts. More recently,
the IA BS ree- px osed its revised insurance contracts uD ring its previous meeting in uJ ne 2015, the IA BS discussed
proposals of r public comment by publishing the epx osure the accounting conseuq ences that could arise rf om an insurer
dratf 2/DE 01 7/3 Insurance Contracts t( he )DE in uJ ne2� 01.3 implementing the of rthcoming insurance contracts standard
iw th an eef f ctive date atf er that o f IFR S ,9 including temporary
iS nce aJ nuary 201,4 the oB ard has been redeliberating volatility and accounting mismatches.
issues raised through the .DE It initially of cused on the
model of r nonp- articipating contracts and has no w turned hT e oB ard also discussed potential options available to
its of cus to modic� ations of r participating contracts. alleviate these conseuq ences. It considered the etx ent to
hw ich IFR S 4 already allosw an entity to reduce temporary
Interaction with other standards volatility and accounting mismatches, and hw ether IFR 4 �S
should be amended.
hT roughout its redeliberations, the oB ard has considered
hw ether the accounting of r insurance contracts ow uld uD ring its uJ ly 2015 meeting, the IA BS decided to amend
be consistent iw th other eix sting or uf ture standards, IFR S 4 to permit an entity to ecx lude rf om prot� or loss,
including the ne w revenue recognition standard – IFR1�S 5 and recognise in other comprehensive income ICO( ,) the
Revenue from Contracts with Customers1. Much o f dief f rence betew en the amounts recognised in prot� or
the guidance contained in the DE aw s designed to loss under IFR S 9 and under IA S 93 Financial Instruments:
align iw th the IAs’BS and the FAs’BS oj int standard on Recognition and Measurement of r specie� d assets relating to
revenuer� ecognition. insurance activities.
hT e oB ard has also considered many o f the decisions hT is accounting treatment ow uld only apply:
made in the ne w n� ancial instruments standard, IFR 9 �S
Financial Instruments2 – including the aw y in hw ich • i f the entity issues contracts that are accounted of r under
IFR S ,4 and applies IFR S 9 in conuj nction iw th IFR S ;4 and
IFR 9 �S might interact iw th the n� al insurance contracts
standard – because IFR 9 �S iw ll cover a large maoj rity • to n� ancial assets that are classie� d at af ir value through
o f an insurers’ i� nvestments. Additionally, the oB ard is prot� or loss F( PTV L ) under IFR S 9 hw en those assets ew re
eax mining ho w best to address the conseuq ences o f the previously, or ow uld have been, measured at amortised
dief f rent eef f ctive dates o f IFR S 9 and the of rthcoming cost or as availableof- rs- ale under IA S .93
insurance contracts standard.
hT e sta f f continue to epx lore other approaches to address
1 2 the accounting conseuq ences o f applying IFR S 9 in advance
o f the of rthcoming insurance contractss� tandard, including
Contents options to deef r the eef f ctive date o f IFR S .9 hT e sta f f
recognised that more than one permitted approach may need
to be considered, and iw ll af vour options that provide users o f
n� ancial statements iw th useuf l n� ancial inof rmation during
the period betew en the eef f ctive dates o f the tow standards.
hT e sta f f epx ect to as k the IA BS of r technical decisions on the
outstanding issues during the remainder o f 2015. hT e eef f ctive
date o f the n� al standard iw ll be discussed atf er the IA BS has
concluded its redeliberations on other topics. A n� al standard
is not epx ected in 2015.
1. eS e our Issues IneD- pth : Revenue rf om oC ntracts iw th uC stomers
eS( ptember 20 1.)4 In February 2015, the IA BS started discussing
targeted amendments to the ne w standard ; of r more detail, see our
IFR S eN sw letter : Revenue .
2. eS e our First Impressions : Financial instruments –hT e complete
standard eS( ptember2� 01.)4
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ADDRESSING THE CONSEQUENCES OF DIFFERENT
EFFECTIVE DATES
Different What’s the issue?
effective dates
tS aek holders are concerned about temporary increases in accounting mismatches and other
of IFRS 9 and sources o f volatility in prot� or loss and euq ity created by changes in the classic� ation and
the forthcoming measurement o f n� ancial assets i f IFR S 9 is applied in advance o f the of rthcoming insurance
contractss� tandard.
insurance
contracts In particular, some insurers are concerned that there are circumstances in hw ich n� ancial assets
currently measured at amortised cost or classie� d as availableof- rs- ale under IA S 93 ow uld be
standard could
classie� d at FPTV L under IFR.9 �S hT e of lloiw ng conseuq ences are possible.
have accounting
consequences. • Accounting mismatches could arise in prot� or loss and euq ity i f insurance contract liabilities are
measured on a cost basis – e.g. using a locek di- n discount rate.
• oV latility relating to the shareholders’ interest in n� ancial assets classie� d at FPTV L that
underlie contracts iw th direct participation ef atures could arise in prot� or loss and euq ity –
some o f this volatility ow uld not eix st once the of rthcoming insurance contracts standard is
eef f ctive.
hT e sta f f considered the of lloiw ng three options to address these conseuq ences.
Option Where to fnd further information
1 Use eix sting options under IFR S 4 For more details on the options available to
entities under eix sting IFR S ,4 read our IFR S
eN sw letter : Insurance – Issue64 � .
2 Amend IFR S 4 hT is is discussed in the section belo.w
3 eD ef r the eef f ctive date o f IFR S 9 in hT e sta f f plan to provide the oB ard iw th an
some circumstances agenda paper discussing possible options of r
deef rring the eef f ctive date o f IFR S 9 at the
eS ptember meeting.
What possible amendments to IFRS 4 did the staff consider?
hT e sta f f considered the of lloiw ng possible amendments to IFR S 4 to address accounting
mismatches and temporary volatility.
How the amendment Effect of application Impact on entities
would work
A. Shadow adjustment for shareholders’ interest in underlying assets
nE tity maek s a Reduces temporary • oC uld remove nont- emporary volatility
shado w aduj stment volatility in prot� or loss in pro� t or loss that ow uld persist
of r all unrealised of r the shareholders ’ atf er the of rthcoming insurance
gains and losses on interest only. contracts standard is applied, and
underlying assets hw ich should rightly appear in the
that are attributable n� ancials� tatements.
to the shareholders o f
• oN signic� ant implementation
thee� ntity.
ef of rt of r entities that already apply
shadoa�w ccounting.
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How the amendment Effect of application Impact on entities
would work
B. Shadow adjustment for assets backing non-participating insurance contracts
nE tity maek s a shado w Reduces accounting • oC uld obscure the eef f ct o f any
aduj stment of r the mismatches in prot� or economic mismatches betew en non-
unrealised gains and loss betew en assets participating insurance contracts and
losses on assets classie� d at FPTV L and related assets.
designated as bacik ng liabilities valued on a
• nE tities ow uld be reuq ired to begin
insurance contracts, cost basis only.
linik ng and tracik ng assets to non-
including those hw ere
participating insurance contracts.
there is no direct
relationship betew en
the contract and
thea� ssets.
C. Apply IFRS 9 with an adjustment that offsets the effect of IFRS 9 on proft or loss
nE tity recognises an Reduces temporary • oC nsistent application o f IFR S 9 to all
aduj stment to prot� or volatility in prot� or assets of r all entities.
loss to osf f et the eef f ct loss of r shareholders’
• Aduj stment to prot� or loss could
on prot� or loss o f interest and reduces
be taek n against ICO or insurance
applying IFR S .9 accounting mismatches
contract liabilities. hT e sta f f believe that
in prot� or loss
aduj sting against ICO ow uld be easier
betew en assets
to epx lain to users, and ow uld result in
classie� d at FPTV L and
a similar presentation to IA.93 �S
liabilities valued on a
cost basis. • Aduj stment ow uld apply to some or all
assets classie� d at FPTV L under IFR S 9
that ow uld not have been under IA S .93
• nE tities ow uld be reuq ired to perof rm a
parallel run o f IFR 9 �S and IA 93 �S during
the period betew en the eef f ctive dates
o f IFR 9 �S and IFR.4 �S
hT e sta f f considered that Amendment C ow uld address both accounting mismatches and
temporary volatility, ow uld not reuq ire etx ensive operational change and could be easily
understood by users o f n� ancial statements.
What did the staff recommend?
aB sed on the above considerations, the sta f f recommended that IFR S 4 be amended to permit an
entity to ecx lude rf om prot� or loss, and recognise in ICO , the dief f rence betew en the amounts
that ow uld be recognised in prot� or loss under IFR S 9 and under IA S .93
hT is accounting treatment ow uld only be used i f the entity:
3
• issues contracts that are accounted of r under IFR S 4 ;
• applies IFR S ;9 and
.3 hT e sta f f noted that this option should be restricted to entities that issue contracts in the scope o f IFR S ,4 but
iw ll consider in uf ture meetings hw ether the scope should be restricted uf rther.
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• holds n� ancial assets that are classie� d at FPTV L under IFR S 9 hw en those assets ew re
previously measured at amortised cost or classie� d as availableof- rs- ale under IA S .93
eB of re the oB ard voted, the sta f f presented tow additional recommendations – namely that the
amendment ow uld be limited to n� ancial assets:
• that relate to insurance activities ; and
• that are mandatorily classie� d at FPTV L under IFR S ,9 and that ew re previously measured at
amortised cost or classie� d as availableof- rs- ale under IA S .93
What did the IASB discuss?
Most oB ard members supported the stas’f f recommendation as a simple and transparent solution
that could result in minimal investment of r entities. hT ey believed that this approach ow uld directly
address the issue that aw s brought to the IA BS by staek holders – i.e. temporary volatility in prot�
or loss – and ow uld result in comparability betew en the insurance industry and other industries, as
all entities ow uld be applying IFR S 9 at the same time.
nO e oB ard member epx ressed concern that the stas’f f recommendation ow uld not provide a
solution of r temporary volatility in euq ity. oH ew ver, the sta f f noted that entities ow uld end up iw th
the same or similar volatility in euq ity as they epx erienced under IA S 93 of r underlying assets
classie� d as availableof- rs- ale, and that this issue aw s limited to underlying assets that ow uld have
been measured at amortised cost under IA S .93
Another oB ard member aw s not concerned by volatility in euq ity under IFR,S as the insurance
industry relies on other regulatory capital standards – e.g. oS lvency II.
ow T oB ard members preef rred that the oB ard do nothing to address this issue, other than to
reuq ire additional disclosures of r insurers. oS me other oB ard members suggested that the
aduj stment should be made to the insurance liabilities, rather than ICO , given that the amendment
is to IFR S .4
The Board What did the IASB decide?
tentatively
hT e oB ard tentatively decided to amend IFR S .4 For specie� d assets, an entity ow uld be permitted
decided to to remove rf om prot� or loss, and recognise in ICO , the dief f rence betew en :
amend IFRS 4
• the amounts that ow uld be recognised in prot� or loss under IFR S ;9 and
to permit an
• the amounts recognised in prot� or loss under IA S .93
entity to remove
In doing this, an entity ow uld apply IFR S 9 in uf ll but ow uld maek the aduj stments described above
the impact of
in prot� or loss, and ICO , of r assets that:
applying IFRS 9
• ew re previously, or ow uld have been, measured at amortised cost or classie� d as availableof- r-
from proft or loss,
sale under IA;93 �S
subject to certain
• are classie� d at FPTV L under IFR S ;9 and
limitations.
• relate to insurance activities.
hT e aduj stments could only be applied i f the entity:
• issues contracts that are accounted of r under IFR S ;4 and
• applies IFR S 9 in conuj nction iw th IFR S .4
oC nseuq ently, the net eef f ct on prot� or loss ow uld ree� ct the IA S 93 accounting of r those
specie� d assets.
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hT e oB ard asek d the sta f f to consider the of lloiw ng issues hw ich the oB ard iw ll discuss at a
uf turem� eeting.
• hT e scope o f the amendment, including the den� ition o f an insurance activity.
• oH w to address transef rs betew en activities – e.g. betew en insurancer- elated and non-
insurancer- elated activities.
• Reuq ired disclosures.
hT e sta f f iw ll continue to analyse the accounting conseuq ences that could arise rf om the
application o f IFR S 9 of r entities applying IFR S 4 beof re the of rthcoming insurance contracts
standard.o T uq iclk y address any possible issues, the sta f f iw ll continue to epx lore several
approaches to addressing accounting conseuq ences, including approaches based on a deef rral o f
IFR S .9
hT e sta f f noted that there may be a need to consider hw ether a single approach, or a variety o f
approaches – e.g. a combination o f asset - and liabilityb- ased approaches – is necessary. hT is is
because o f the dic� f ulties in precisely targeting any approaches and the dief f rent circumstances
aef f cting reporting entities.
KPMG insight
hT e oB ards’ decision of cuses on addressing volatility in prot� or loss, and does not address:
• increased volatility in euq ity, hw ich may arise of r nonp- articipating contracts ; and
• the shareholders ’ share o f assets supporting participating contracts
i f assets are measured at amortised cost under IA S 93 – e.g. loans and receivables. nO
applying IFR S ,9 some o f these assets may be mandatorily measured at af ir value.
Users ow uld af ce tow signic� ant accounting changes in a short period o f time – IFR S 9 and
the of rthcoming insurance contracts standard – and the oB ards’ decision suggests that it is
of cused on creating a transition period betew en the eef f ctive dates o f IFR S 4 and IFR S 9 that
ow uld be easily understood by users. oH ew ver, the uf ll impact o f the interaction o f these tow
standards iw ll remain unnk onw until redeliberations on the of rthcoming insurance contracts
standard are complete.
Insurers ow uld need to change their n� ancial reporting processes and systems in order to run
IA S 93 and IFR S 9 in parallel of r relevant n� ancial assets. hW ile any changes made to systems
and processes to implement IFR S 9 ow uld remain in eef f ct atf er the of rthcoming insurance
contracts standard is applied, incremental eof f rt ow uld be needed to develop the processes
necessary to permit the timely preparation o f accounts and temporary disclosures.
In addition, entities ow uld have to consider the compleix ties o f ho w the proposed amendment
interacts iw th their current accounting of r insurance contract liabilities – e.g. participating
contracts and shado w accounting aduj stments.
Insurers applying the proposed amendment ow uld still af ce operational challenges. For
eax mple, additional controls ow uld be reuq ired to:
• identiyf n� ancial assets classie� d at FPTV L under IFR S 9 as relating to insurance
activitiesa�; nd
• determine hw ether these assets ow uld have a dief f rent classic� ation under IA S .93
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APPENDIX: SUMMARY OF IASB’S REDELIBERATIONS
Is there an
What did the
What did the IASB decide? identifed change
IASB discuss?
to the ED?
Targeted issues
Unlocking the • Favourable changes in estimates that arise atf er losses have previously been eY s
contractual recognised in prot� or loss ow uld be recognised in prot� or loss to the etx ent
service margin that they reverse losses that relate to coverage and other services in the uf ture.
(CSM)
• iD ef f rences betew en the current and previous estimates o f the ris k aduj stment eY s
that relate to coverage and other services of r uf ture periods ow uld be added
to, or deducted rf om, the MSC , subej ct to the condition that the MSC ow uld
not be negative. oC nseuq ently, changes in the ris k aduj stment that relate to
coverage and other services provided in the current and past periods ow uld be
recognised immediately in prot� or loss.
• For nonp- articipating contracts, the locek di- n rate at inception o f the contract oN
ow uld be used of r :
– accreting interest on the MSC ; and
– calculating the change in the present value o f epx ected cash o� sw that aduj st
the MSC .
Presenting • An entity could choose as its accounting policy to present the eef f cts o f eY s
the effects of changes in discount rates in prot� or loss or in ICO , and apply that accounting
changes in the policy to all contracts iw thin a portof lio.
discount rate
• Application guidance ow uld be added to clariyf that, in accordance iw th IA 8 �S eY s
in OCI
Accounting Policies, Changes in Accounting Estimates and Errors, an entity
ow uld select and apply its accounting policies consistently of r similar contracts,
considering the portof lio in hw ich the contract is included, the assets that the
entity holds and ho w those assets are accounted of r.
• hT e reuq irements in IA 8 �S ow uld be applied iw thout modic� ation to changes eY s
in accounting policy relating to the presentation o f the eef f cts o f changes in
discount rates.
• I f an entity chooses to present the eef f cts o f changes in discount rates in ICO , eY s
then it ow uld recognise:
– in proft or loss: the interest epx ense determined using the discount rates
that applied at the date on hw ich the contract aw s initially recognised ; and
– in OCI: the dief f rence betew en the carrying amount o f the insurance contract
measured using the discount rates that applied at the reporting date and the
amount o f the insurance contract measured using the discount rates that
applied at the date on hw ich the contract aw s initially recognised.
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Is there an
What did the
What did the IASB decide? identifed change
IASB discuss?
to the ED?
Presenting • An entity ow uld disclose the of lloiw ng inof rmation. eY s
the effects of
– For all portfolios of insurance contracts: An analysis o f total interest epx ense
changes in the
included in total comprehensive income disaggregated at a minimum into :
discount rate in
OCI (continued) - the amount o f interest accretion determined using cur rent discount rates;
- the ef ef cts on the measurement o f the insurance contract o f changes in
discount rates in the period ; and
- the dif ef rence betew en the present value o f changes in epx ected cash
o� sw that aduj st the MSC in a reporting period measured using the
discount rates that applied on initial recognition o f insurance contracts and
current discount rates.
– In addition, for portfolios of insurance contracts for which the effects of
changes in discount rates are presented in OCI: An analysis o f total interest
epx ense included in total comprehensive income disaggregated at a
minimum into :
- interest accretion at the discount rate that applied at initial recognition o f
insurance contracts reported in prot� or loss of r the period ; and
- the movement in ICO of r the period.
• For nonp- articipating contracts accounted of r under the premium allocation eY s
approach P( AA,) hw en an entity presents the eef f cts o f changes in discount
rates in ICO , the discount rate that is used to determine the interest epx ense
of r the liability of r incurred claims ow uld be the rate locek d in at the date the
claim aw s incurred. hT is ow uld also apply i f a liability of r onerous contracts is
established under the PAA, in hw ich case the locek di- n discount rate ow uld be
the rate on the date the liability is recognised.
Insurance • An entity ow uld be prohibited rf om presenting premium inof rmation in prot� oN
contract or loss i f that inof rmation is not consistent iw th commonly understood notions
revenue or�f evenue.
• An entity ow uld present insurance contract revenue in prot� or loss, as oN
proposed in paragraphs 55–6 9 and 19B–8B o f the .DE
• An entity ow uld disclose the of lloiw ng: oN
– a reconciliation that separately reconciles the opening and closing balances
o f the components o f the insurance contract asset or liability ;
– a reconciliation rf om the premiums receiv ed in the period to the insurance
contract revenue in the period;
– the inputs used hw en determining the insurance contract re venue that is
recognised in the period ; and
– the ef ef ct o f the insurance contracts that are initially recognised in the period
on the amounts that are recognised in the statement o f n� ancial position.
• For contracts accounted of r under the PAA, insurance contract revenue ow uld be eY s
recognised on the basis o f the passage o f time. oH ew ver, i f the epx ected pattern
o f release o f ris k dief f rs signic� antly rf om the passage o f time, then it ow uld be
recognised on the basis o f the epx ected timing o f incurred claims and benet� s.
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Is there an
What did the
What did the IASB decide? identifed change
IASB discuss?
to the ED?
Transition • An entity ow uld apply the of rthcoming insurance contracts standard oN
retrospectively in accordance iw th IA S ,8 unless this is impracticable.
• For the simplie� d retrospective approach, instead o f estimating the ris k eY s
aduj stment at the date o f initial recognition as the ris k aduj stment at the
beginning o f the earliest period presented, an entity ow uld estimate it by
aduj sting the ris k aduj stment at the beginning o f the earliest period presented
by the epx ected release o f the ris k beof re the beginning o f the earliest period
presented. hT e epx ected release o f ris k ow uld be determined iw th reef rence
to the release o f ris k of r similar insurance contracts that the entity issued at the
beginning o f the earliest periodp� resented.
• I f the simplie� d retrospective approach is impracticable, then an entity ow uld eY s
apply a af ir value approach. hT e entity ow uld determine the:
– MSC at the beginning o f the earliest period presented as the dif ef rence
betew en the af ir value o f the insurance contract and the uf ll� ment cash o� sw
measured at that date ; and
– interest epx ense in prot� or loss, and the related amount o f ICO accumulated
in euq ity, by estimating the discount rate at the date o f initial recognition
using the method in the simplie� d retrospective approach proposed in
the.DE �
• For each period presented of r hw ich there are contracts measured in eY s
accordance iw th the simplie� d retrospective approach or the af ir value
approach, an entity ow uld disclose the inof rmation proposed in paragraph 8C o f
the DE separately of r contracts measured using the:
– simpli� ed retrospective approach ; and
– f air value approach.
Participating contracts
The variable • For direct participating contracts – i.e. those that meet the of lloiw ng criteria – eY s
fee approach the MSC ow uld be unlocek d of r changes in the estimate o f the variable ef e of r
service that the entity epx ects to earn:
– the contractual terms speciyf that the policyholder participates in a den� ed
share o f a clearly identie� d pool o f underlying items;
– the entity epx ects to pay to the policyholder an amount euq al to a substantial
share o f returns rf om the underlying items ; and
– a substantial portion o f the cash o� sw that the entity epx ects to pay
to the policyholder is epx ected to vary iw th the cash o� sw rf om the
underlyingi� tems.
Recognising • An entity ow uld recognise the MSC in prot� or loss on the basis o f the passage eY s
the CSM in o f time.
proft or loss
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Is there an
What did the
What did the IASB decide? identifed change
IASB discuss?
to the ED?
Non-targeted issues
Recognising • hT e remaining MSC ow uld be recognised in prot� or loss over the coverage oN
the CSM in period in the systematic aw y that best ree� cts the remaining transef r o f the
proft or loss services under the insurance contract.
• For nonp- articipating contracts, the service represented by the MSC ow uld be eY s
insurance coverage that:
– is provided on the basis o f the passage o f time ; and
– re� ects the epx ected number o f contracts in of rce.
Fixed-fee • nE tities ow uld be permitted, but not reuq ired, to apply the revenue recognition eY s
service standard to ex� def- e service contracts that meet the criteria stated in
contracts paragraphe(7 � ) o f the .DE
Signifcant • hT e s’DE guidance iw ll be aduj sted to clariyf that signic� ant insurance ris k eY s
insurance risk occurs only hw en there is a possibility that an issuer iw ll incur a loss on a
presentv- alueb� asis.
Portfolio • Paragraphs 54–34 o f the DE iw ll be amended to clariyf that contracts acuq ired eY s
transfers and through a portof lio transef r or a business combination ow uld be accounted of r
business as i f they had been issued by the entity at the date o f the portof lio transef r or
combinations the business combination.
Determining • hT e discount rates used to aduj st the cash o� sw o f an insurance contract of r the oN
discount rates time value o f money ow uld be consistent iw th observable current marek t prices
when there of r instruments iw th cash o� sw hw ose characteristics are consistent iw th those
is a lack of o f the insurance contract.
observable
• In determining those discount rates, an entity ow uld use uj dgement to: eY s
data
– ensure that appropriate aduj stments are made to obser vable inputs, to
accommodate any dief f rences betew en observed transactions and the
insurance contracts being measured ; and
– develop any unobservable inputs using the best inof rmation available
in the circumstances, hw ile remaining consistent iw th the obej ctive o f
ree� cting the aw y marek t participants assess those inputs – accordingly, any
unobservable inputs should not contradict any available and relevant marek t
data.
Asymmetrical • Atf er inception, entities ow uld recognise in prot� or loss any changes in eY s
treatment of estimates o f cash o� sw of r a reinsurance contract that arise as a result o f
gains from changes in estimates o f cash o� sw that are recognised immediately in prot� or
reinsurance loss of r an underlying insurance contract.
contracts
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