IFRS 4: Insurance Contracts
- prohibits provisions for potential claims under contracts that do not exist at the end of the reporting period;
- requires a test for the adequacy of recognised insurance liabilities and requires an impairment test to be carried out for reinsurance assets; and
- requires an insurer to keep insurance liabilities in its statement of financial position (balance sheet) until such time that they are discharged, cancelled or expire. It also requires an entity to present insurance liabilities without offsetting them against related reinsurance assets.
- measure insurance liabilities on an undiscounted basis;
- measure contractual rights to future investment management fees at an amount that exceeds their fair value by comparison with current fees charged by other market participants for similar services; and
- use non-uniform accounting policies for the insurance liabilities of subsidiaries.
Steve Collings FMAAT ACCA DipIFRS is Audit Manager at Leavitt Walmsley Associates www.lwaltd.com . Read all of Collings's analyses of the International Financial Reporting Standards .