24/09/2019 - EFRAG's final comment letter on the IASB's ED/2019/4 Amendments to IFRS 17

EFRAG expresses its appreciation for the consideration of the topics identified in its letter of 3 September 2018. However, EFRAG considers that the following issues warrant further consideration:

• EFRAG agrees with the IASB's reporting objectives of the level of aggregation requirements in IFRS 17 and acknowledges that the annual cohort requirement has been identified as a practical simplification. Nonetheless, EFRAG considers that this requirement leads to unnecessary costs in some fact patterns. Feedback from EFRAG's constituents confirms that the issue relates to contracts with the characteristics described in paragraphs B67 - B71 that have 'substantial' risk sharing. Most of these contracts that prevail in European jurisdictions are eligible for the variable fee approach. In some jurisdictions the issue relates to contracts eligible for the general model, including contracts without the characteristics described in B67 – B71 for which cash flow matching techniques are applied across generations. EFRAG recommends that the IASB consider developing an appropriate solution for them, reflective of the reporting objectives of the level of aggregation requirements and of their economic characteristics.
• EFRAG remains concerned about implementation challenges faced by preparers when applying the modified retrospective approach and encourages the IASB to confirm in the main text of the final standard that the use of estimates is allowed, including those needed to approximate the missing information.

EFRAG supports many of the amendments in the ED, however has several remaining concerns illustrated in the letter.

EFRAG disagrees with 1 January 2022 as the effective date. EFRAG considers that 1 January 2023 is a realistic effective date, with early application permitted.

Finally, EFRAG considers that the necessary amendments to IFRS 4 Insurance Contracts extending the optional deferral of IFRS 9 Financial Instruments need to be published as early as possible and, at the latest, before the end of June 2020 so as to enable timely endorsement within Europe before the current expiry date of 1 January 2021.

EFRAG's comment letter is available here.