IFRS 4 amendments

IFRS 4 amendments

Amendments respond to industry concerns about the impact of differing effective dates.

Joachim Kölschbach, KPMG's global IFRS insurance leader

Global IFRS Insurance Leader

KPMG in Spain

KPMG IFRS | Proposed amendments to IFRS 4 Insurance Contracts article image | Abseiler rappelling down an ice wall

The two optional solutions reduce the impacts but include various complexities.

Differing effective dates of IFRS 9 Financial Instruments and the new insurance contracts standard could have had a significant impact on insurers.

In response to concerns regarding temporary accounting mismatches and volatility, and increased costs and complexity, the International Accounting Standards Board (the Board) issued amendments to IFRS 4 Insurance Contracts in 2017.

The two optional solutions raised some considerations which required detailed analysis and management judgement. 

On the issue of IFRS 17 (Revised) Insurance Contracts in June 2020, the end date for applying the two options under the IFRS 4 amendments was extended to 1 January 2023, aligned with the effective date of IFRS 17.

Two optional solutions

Temporary exemption from IFRS 9

  • Rather than having to implement IFRS 9 in 2018, some companies are permitted to continue to apply IAS 39 Financial Instruments: Recognition and Measurement.
  • To qualify, a reporting company’s activities need to be predominantly connected with insurance.

Overlay approach

  • This optional solution provides an overlay approach to presentation to alleviate temporary accounting mismatches and volatility.
  • For designated financial assets, a company is permitted to reclassify between profit or loss and other comprehensive income (OCI), the difference between the amounts recognised in profit or loss under IFRS 9 and those that would have been reported under IAS 39.

Deciding how to best use the amendments

When deciding if and how to use the amendments, companies considered:

  • the costs and benefits of the two optional solutions;
  • the effectiveness of each solution in mitigating any costs arising from the differing effective dates;
  • if and how their peers would use the amendments; and
  • the expectations and reactions of investors and other users of the financial statements.


Potential impacts

The impact of these amendments included the following:

  • Judgement was needed to complete the predominance assessment. To qualify for the temporary exemption, management had to consider both qualitative and quantitative factors in determining whether the company meets the eligibility criteria.
  • Applying the temporary exemption for companies within a group structure could have resulted in companies preparing financial reports under both IAS 39 and IFRS 9. If applicable, management considered the costs and complexities of these situations at the group and stand-alone reporting levels.
  • Companies applying the overlay approach have to produce and track IAS 39 and IFRS 9 amounts in parallel for designated financial assets.

If you would like to discuss the IFRS 9 impacts on your business, please speak to your usual KPMG contact.

Find out more

View our presentation (PDF 268 KB) for a high-level visual summary of the amendments.

Visit our IFRS – Insurance hot topics page. And visit our IFRS – Financial instruments hot topics page to find out more about IFRS 9.

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