There was an update on IFRS 4 phase ii at the recent ILAG financial reporting seminar. It seems as if IASB is close to having a draft standard prepared and the speakers from Deloittes thought 2020 or 2021 were likely implementation dates.
The definition of insurance remains (substantively) unchanged from IFRS 4 phase 1 so contracts accounted for as investment business will not be affected by the change to IFRS 4 phase ii.
No indication yet of what will happen to UK GAAP, i.e. will it align to IFRS 4 phase ii?
An interesting comment was that annuity business would be accounted for differently under IFRS 4 phase ii. That is under current GAAP profits are recognised up front on the sale of an annuity. However, under IFRS 4 phase ii a contractual service margin is set up when a policy is sold, effectively spreading profits over the life of the contract. Also there doesn't seem to be a place in IFRS 4 phase ii for VIF / AVIF or DAC.
No discussion of tax consequences in the ILAG forum. I imagine there will need to be a decision over whether there is a bespoke transitional regime for the change from IFRS 4 phase i to phase ii or if the general rules in CTA 2009 section 180 will be used CCH Link.
Issues around modelling of future tax cash flows in light of the change and impact on SII and LACDT.
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