IFRS 4 – Insurance Contracts
ObjectiveThis standard prescribes the guide lines for the accounting treatment of insurance contracts which are issued by entity as insurer along with related disclosure requirements:
This standard requires the insurer to account for the issued insurance contracts as follows:
ObjectiveThis standard prescribes the guide lines for the accounting treatment of insurance contracts which are issued by entity as insurer along with related disclosure requirements:
- Which reflects amounts recognized in the financial statements of insurer relating to such insurance contracts, and
- To enable the users of financial statements to assess the timing, amount and any uncertainties relating to the cash flows of such insurance contracts
This standard requires the insurer to account for the issued insurance contracts as follows:
- The insurer should not recognize any provision for the possible claims relating to the insurance contracts which are not in existence at the end of accounting period
- The insurer should measure its recognized liabilities relating to the estimated future cash flows in respect of insurance contracts using the ‘minimum liability adequacy test’ at each reporting date to ensure the reasonableness of the liability recognized for such insurance contracts
- The insurer is required to consider all the estimated future cash flows under the insurance contract when applying the minimum liability adequacy test, any deficiency in the recognized liability compared to the liability as per minimum liability adequacy test will be reported to statement of profit or loss
- The insurer will derecognize the liability relating to insurance contracts when it is settled, expired or cancelled
- The insurer should assess whether its reinsurance assets are subject to any impairment
- This standard allows that the insurer can change its accounting policy in respect of insurance contracts, if it will result in more reliable and relevant information being reflected in financial statements