Employer accounting for pensions: Insurance accounting vs. employer accounting under IFRS

Employer accounting for pensions: Insurance accounting vs. employer accounting under IFRS

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Speaker(s): Andreas Johannleweling (KPMG AG), Stefan Engeländer

The application of IFRS on insurance contracts is different for issuer (the life insurer) and the policyholder, in case of covering post-employment benefits by insurance contracts.

In May 2017 the IASB issued IFRS 17 "Insurance Contracts", which supersedes IFRS 4 on 1 January 2021. Under IFRS 17, insurance contracts have to be measured as the risk adjusted expected present value of future cash flows based on a fulfilment notion, requiring market-consistency for the measurement of all financial risks. Usually, the measurement under IFRS 17 will not match to measurement of policyholder's rights. According IAS 19 „Employee Benefits", insurance contracts qualified as plan assets or reimbursement rights are measured at fair value to be determined applying IFRS 13 "Fair Value Measurement". IFRS 13 defines fair value on the basis of an exit price notion measured from a market participant's perspective. In absence of observable market prices as measurement basis, IFRS 13 requires a valuation technique referring to as well to a risk adjusted expected present value of future cash flows.

In the context of employee benefits, the measurement of covering insurance contracts has a special relevance. The lecture - presented jointly by the two KPMG´s actuarial experts for IFRS 17 and IAS 19 - will describe the measurement approaches of IFRS 17 respectively IFRS 13 for relevant insurance contracts, analyze the differences and discuss the consequences for the IFRS accounting of the employer in practice.

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