05/08/2021 - EFRAG's Draft comment letter on the IASB Exposure Draft Initial Application of IFRS 17 and IFRS 9 - Comparative Information (Proposed amendment to IFRS 17)

​On 28 July 2021, the IASB issued an Exposure Draft Initial Application of IFRS 17 and IFRS 9 - Comparative Information (Proposed amendment to IFRS 17) ('the ED').

Many insurance entities will first apply IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments for annual reporting periods beginning on or after 1 January 2023. ​The ED addresses concerns relating to the differences in the transition requirements between these two Standards and the resulting accounting mismatches which are expected to have a significant effect on the usefulness of the comparative information presented on initial application of IFRS 17 and IFRS 9.​

​The ED proposes a narrow-scope ​amendment to the IFRS 17 transition requirements for entities that first apply IFRS 17 and IFRS 9 at the same time. This proposed amendment relates to financial assets for which comparative information presented on initial application of IFRS 17 and IFRS 9 has not been restated for IFRS 9. Applying the proposed amendment, an entity would be permitted to present comparative information about such a financial asset as if the classification and measurement requirements of IFRS 9 had been applied to that financial asset.​

In the Draft Comment Letter, EFRAG expresses its appreciation for the IASB’s swift response and delivery of the ED. Also, EFRAG commends the IASB for addressing most of the comments raised by European constituents in this area. Overall, EFRAG agrees with the IASB proposals in the ED as they form a clear improvement over the current situation. In finalising the proposals, EFRAG recommends the IASB to align the scopes of the classification overlay and the temporary exemption from applying IFRS 9 (which is under IFRS 4 Insurance Contracts) due to inconsistencies in the consolidated financial statements and unnecessary operational complexity.  ​