of March 1, 2018 No. 170/5
About enforcement in the territory of the Republic of Belarus of the International accounting standards and their Explanations accepted by Fund of International accounting standards
Based on part one of Item 1 of article 17 of the Law of the Republic of Belarus of July 12, 2013 "About financial accounting and the reporting" Council of Ministers of the Republic of Belarus and National Bank of the Republic of Belarus POSTANOVLYAYUT:
Enact in the territory of the Republic of Belarus as technical regulatory legal acts since January 1, 2019:
International accounting standard (IFRS) 17 "Insurance contracts" according to appendix 1;
Explanation of KRMFO (IFRIC) 23 "Uncertainty concerning rules of calculation of the income tax" according to appendix 2;
the document of International accounting standards "The long-term investments in associated organizations and joint businesses (Amendments to the International accounting standard (IAS) 28)" according to appendix 3;
the document of International accounting standards "Conditions about early repayment with potential negative compensation (Amendments to the International accounting standard (IFRS) 9)" according to appendix 4;
the document of International accounting standards "Annual enhancements of IFRS, the period of 2015-2017" according to appendix 5.
Prime Minister of the Republic of Belarus
Chairman of the board of National Bank of the Republic of Belarus
to the Resolution of Council of Ministers of the Republic of Belarus and National Bank of the Republic of Belarus of March 1, 2018 No. 170/5
International accounting standard (IFRS) 17 "Insurance contracts"
1 IFRS (IFRS) 17 "Insurance contracts" establish the principles of recognition, assessment, representation and disclosure of information on the insurance contracts relating to scope of this standard. The purpose of IFRS (IFRS) 17 is ensuring provision by the organization of pertinent information which truthfully represents such agreements. This information is the basis used by users of the financial reporting for impact assessment which insurance contracts render on financial position, financial results and cash flows of the organization.
2 In case of application of IFRS (IFRS) 17 the organization shall consider the valid rights and obligations irrespective of, they are caused by the agreement, the law or regulations. The agreement is agreement between two or several parties which creates legally protected rights and obligations. Legal security of the rights and obligations in the agreement is provided with the legislation. Agreements can have written form, oral form or be implied owing to customary business practice of the organization. All conditions on the agreement which are obviously specified or implied belong to contractual conditions, but the organization shall not take into account conditions which have no commercial content (that is not having noticeable influence on the economic agreement party). Implied conditions under the agreement include the conditions provided by the law or regulatory requirements. Practice and procedures of the conclusion of contracts with clients vary depending on jurisdictions, industries and the organizations. Besides, they can differ within one organization (for example, they can depend on category of clients or nature of the promised goods or services).
Scope of application
3 The organization shall apply IFRS (IFRS) 17 to:
(a) to the insurance contracts issued by it, including agreements of reinsurance;
(b) to the agreements of reinsurance withheld by it;
(c) to the investment contracts with conditions of discretionary participation issued by it provided that the organization also issues insurance contracts.
4 All references in IFRS (IFRS) 17 to insurance contracts also belong to:
(a) to the withheld agreements of reinsurance, except for:
(i) references to the issued insurance contracts; and
(ii) the cases described in Items 60-70;
(b) to the investment contracts with conditions of discretionary participation specified in Item 3(c), except for references in Item 3(c) insurance contracts and the cases described in Item 71.
5 All references in IFRS (IFRS) 17 to the issued insurance contracts also belong to the insurance contracts acquired by the organization as a result of transfer of insurance contracts or integration of businesses other than the withheld agreements of reinsurance.
6 Appendix A contains determination of the insurance contract, and in the Items B2-B30 Appendix B the application guide of determination of the insurance contract is provided.
7 The organization cannot apply IFRS (IFRS) 17 to:
(a) to the guarantees provided by the producer, the dealer or the retail dealer in connection with sale of the goods or services to the buyer (see IFRS (IFRS) 15 "Revenue under contracts with buyers");
(b) to assets and liabilities of employers according to programs of employee benefits (see IFRS (IAS) 19 of "Employee benefit" and IFRS (IFRS) 2 "Payments on the basis of shares") and to obligations on the retirement benefits reflected in the financial reporting of pension plans with defined benefits (see IFRS (IAS) 26 "Accounting and the reporting under pension plans");
(c) to the rights or obligations provided by the agreement provided by the agreement which depend on future use or the right to use non-financial object (for example, to some license fees, royalty, variables and other conditional lease payments and similar items (see IFRS (IFRS) 15, IFRS (IAS) 38 "Intangible assets" and IFRS (IFRS) 16 "Lease");
(d) to the guarantees of salvage value provided by the producer, the dealer or the retail dealer and the guarantees of salvage value provided by the lessee if they are built in lease term (see IFRS (IFRS) 15 and IFRS (IFRS) 16);
(e) to agreements of financial guarantee, except as specified, when the party which issued them in obvious form declared earlier that it considers such agreements as insurance contracts, and considered them according to the procedure, applicable to insurance contracts. This party shall make the decision on application to such agreements of financial guarantee either IFRS (IFRS) 17, or IFRS (IAS) 32 "Financial instruments: representation", IFRS (IFRS) 7 "Financial instruments: disclosure of information" and IFRS (IFRS) 9 "Financial instruments". The party which issued the agreement can make such decision on each agreement separately, however the decision made under each agreement cannot be reviewed subsequently;
(f) to the conditional compensation which is subject to payment or obtaining in the transaction on integration of businesses (see IFRS (IFRS) 3 "Integration of businesses");
(g) to insurance contracts according to which the organization is holder of the policy, except as specified, when such agreements are the withheld agreements of reinsurance (see Item 3(b)).
8 Some agreements answer determination of the insurance contract, however their main objective consists in provision of services for the fixed remuneration. The organization can apply at own discretion to such agreements which it issues IFRS (IFRS) 15, but not IFRS (IFRS) 17 in that and only if certain conditions are satisfied. The organization can make such decision on each agreement separately, however the decision made under each agreement cannot be reviewed subsequently. The following belongs to the specified conditions:
(a) the organization does not reflect risk assessment, connected with the certain client, in case of determination of the price of the contract with this client;
(b) the agreement provides compensation to the client in the form of provision of services, but not by implementation of money payments to the client; and
(c) the insurance risk transferred under the agreement arises mainly in connection with use of services by the client, but not in connection with uncertainty concerning the cost of such services.
Combination of insurance contracts
9 Set or number of the insurance contracts signed with the same or connected partner can pursue one common commercial purpose or intend for its achievement. To reflect contents of such agreements, set or number of such agreements as single whole can be required to consider the organizations. For example, if the rights or obligations under one agreement are provided only to nullify the rights and obligations under other agreement signed at the same time with the same partner, the aggregate effect of these agreements consists in lack of the rights and obligations.
Allocation of components from the insurance contract (the Items B31-B 35)
10 The insurance contract may contain one or several components which would belong to scope of other standards if they were separate agreements. For example, the insurance contract may contain investment component or service component (or that and another). The organization shall apply Items 11-13, to identify the constituting agreements and to determine procedure for their accounting.
11 The organization shall:
(a) apply IFRS (IFRS) 9 to determination of whether the built-in derivative tool which shall be separated contains the agreement, and if contains how to consider such derivative tool;
(b) separate the basic agreement of insurance from investment component in that and only if this investment component is distinguishable (see the Items B31-B 32). The organization shall apply requirements of IFRS (IFRS) 9 to accounting of the allocated investment component.
12 After application of requirements of Item 11 for the purpose of department of all cash flows connected with the built-in derivative tools and distinguishable investment components, the organization shall apply Item 7 IFRS (IFRS) 15, to select the promise to transfer to the holder of the policy distinguishable goods or not insurance services from the basic agreement of insurance. The organization shall consider such promises according to IFRS (IFRS) 15. In case of application of Item 7 IFRS (IFRS) 15 the organization shall apply the Items B33-B35 IFRS (IFRS) 17 to department of such promises and in case of initial recognition shall:
(a) apply IFRS (IFRS) 15 to distribution of cash inflows between insurance component and promises to transfer distinguishable goods or not insurance services; and
(b) distribute cash outflows between insurance component and promises to transfer goods or not insurance services which are considered according to IFRS (IFRS) 15, so that:
(i) cash outflows which are directly connected with each component belonged on this component; and
(ii) all other cash outflows were distributed on systematic and the rationale reflecting cash outflows which emergence the organization would expect if this component was the separate agreement.
13 After application of Items 11-12 the organization shall apply IFRS (IFRS) 17 to all remained components of the basic agreement of insurance. Further all references in IFRS (IFRS) 17 to the built-in derivative tools belong to derivative tools which were not separated the basic agreement of insurance, and all references to investment components belong to investment components which were not separated the basic agreement of insurance (except for the investment components specified in the Items B31-B 32).
Level of aggregation of insurance contracts
14 The organization shall identify portfolios of insurance contracts. The portfolio includes agreements which are subject to similar risks and are controlled jointly. It is supposed that agreements within one product line are subject to similar risks and therefore it is expected that they will enter one portfolio provided that they are controlled jointly. It is supposed that the agreements relating to various product lines (for example, agreements with the fixed annuity payments and one-time award in comparison with life insurance contracts for certain term), are not subject to similar risks and therefore it is expected that they will enter different portfolios.
15 Items 16-24 are applied to the issued insurance contracts. Requirements for the level of aggregation of the withheld agreements of reinsurance are stated in Item 61.
16 The organization shall divide portfolio of the issued insurance contracts at least on:
(a) group of agreements which are burdensome at the time of initial recognition if those are;
(b) group of agreements concerning which at the time of initial recognition there is no considerable probability that subsequently they will become burdensome if those are; and
(c) group of the agreements which remained in portfolio if those are.
17 If the organization has reasonable and confirmable information allowing to come to conclusion that all set of agreements will concern to one group according to Item 16, that she can estimate this set of agreements to determine whether agreements are burdensome (see Item 47), and to estimate this set of agreements to determine whether there is no considerable probability that subsequently these agreements will become burdensome (see Item 19). If the organization has no the reasonable and confirmable information allowing to come to conclusion that all set of agreements will concern to one group, she shall estimate each agreement separately to determine to what group it concerns.
18 In relation to the issued agreements to which the organization applies approach on the basis of bonus allotment (see Items 53-59), the organization shall recognize assumption that at the time of initial recognition in portfolio there are no burdensome agreements, except as specified, when the facts and circumstances are specified the return. The organization shall analyse probability of change of the corresponding facts and circumstances to determine whether there is no considerable probability that agreements which at the time of initial recognition are not burdensome will become burdensome subsequently.
19 In relation to the issued agreements to which the organization does not apply approach on the basis of bonus allotment (see Items 53-59), the analysis regarding lack of considerable probability that agreements which at the time of initial recognition are not burdensome will become burdensome subsequently, the organization shall carry out:
(a) proceeding from probability of changes in assumptions which, in case of their origin, would lead to assessment of agreements as burdensome;
(b) using information on estimates provided in the internal reporting of the organization. Thus, in case of assessment of whether there is no considerable probability that agreements which at the time of initial recognition are not burdensome will become burdensome subsequently:
(i) the organization shall not neglect information provided in its internal reporting on influence of changes in assumptions on different types of contracts for opportunity that they will become burdensome; but
(ii) the organization shall not collect the additional information over that which is provided in its internal reporting, about influence of changes in assumptions on different types of agreements.
20 If application of Items 14-19 leads to the fact that agreements as a part of one portfolio get into different groups only because the law or regulatory requirements definitely limit practical possibility of the organization to establish various rates or level of benefits for holders of policies with various characteristics, the organization has the right to include such agreements in one group. The organization has no right to apply this Item by analogy to other cases.
21 The organization has the right to break the groups specified in Item 16, subgroups. For example, the organization can make the decision to divide portfolio on:
(a) several groups of agreements which are not burdensome at the time of initial recognition if information which allocates is provided in the internal reporting of the organization:
(i) various levels of profitability; or
(ii) various probabilities that agreements will become burdensome after initial recognition; and
(b) several groups of agreements which are burdensome at the time of initial recognition if more detailed information on degree of complication of these agreements is provided in the internal reporting of the organization.
22 The organization cannot include the agreements issued with difference more than in one year in the same group. For accomplishment of this condition the organization shall break, in case of need, the groups specified in Items 16-21, subgroups.
23 The group of insurance contracts can include only one agreement if it is result of application of Items 14-22.
24 The organization shall apply requirements of IFRS (IFRS) 17 regarding recognition and assessment to groups of the issued insurance contracts which were determined according to Items 14-23. The organization shall determine these groups at the time of initial recognition and has no right to review structure of groups subsequently. For group appraisal of agreements the organization can estimate cash flows on agreement performance at higher level of aggregation, than group or portfolio provided that the organization is able to include the corresponding cash flows on agreement performance in assessment of this group according to Items 32(a), 40(a)(i) and 40(b) by distribution of such estimations on groups of agreements.
25 The organization shall recognize group of insurance contracts which it issues, on the earliest of the following dates:
(a) the beginning of the period of insurance coverage on group of agreements;
(b) date when there comes the payment due date of the first payment from the holder of the policy in the corresponding group of agreements; and
(c) in relation to group of burdensome agreements - date when this group becomes burdensome.
26 If the agreement does not provide certain date of the first payment, then date of the first actual payment from the holder of the policy under this agreement is considered such date. The organization shall determine whether applying Item 16, constitute any agreements group of burdensome agreements before the earliest date from specified in Items 25(a) and 25(b) if the facts and circumstances testify to availability of such group.
27 The organization shall recognize asset or liability concerning the acquisition cash flows relating to group of the issued insurance contracts which the organization pays or receives until recognition of this group of agreements, except as specified, when the organization decides to recognize them as expenses or the income according to Item 59(a). The organization shall derecognize the asset or liability recognized concerning such acquisition cash flows at the time of recognition of group of insurance contracts to which these cash flows belong (see Item 38(b)).
28 In case of recognition of group of insurance contracts in the accounting period the organization shall include in it only those agreements which were issued until the end of the accounting period, and shall estimate discount rates for date of initial recognition (see Item B 73) and the insurance coverage units provided in the accounting period (see Item B 119). After the reporting period the organization can issue new agreements and add them to the corresponding groups at condition of observance of the requirement of Item 22. The organization shall add agreements to groups in that accounting period in which the agreement was issued. It can lead to changes in determination of discount rates for date of initial recognition according to the Item B73. The organization shall apply the reviewed discount rates since the beginning of the accounting period at which new agreements are added to group.
Assessment (Items B36-B 119)
29 The organization shall apply Items 30-52 to all groups of insurance contracts which fall within scope of IFRS (IFRS) 17, behind the following exceptions:
(a) for groups of insurance contracts which satisfy to any of the criteria specified in Item 53, the organization can simplify group appraisal, having applied the approach on the basis of bonus allotment described in Items 55-59;
(b) the organization shall apply Items 32-46 according to requirements of Items 63-70 to groups of the withheld agreements of reinsurance. Items 45 (about insurance contracts with conditions of direct participation) and 47-52 (about burdensome agreements) are not applied to groups of the withheld agreements of reinsurance;
(c) the organization shall apply Items 32-52 taking into account the modifications described in Item 71 to groups of investment contracts with conditions of discretionary participation.
30 In case of application of IFRS (IAS) 21 "Influence of changes of the currency rates" to group of insurance contracts which lead to emergence of cash flows in foreign currency the organization shall consider this group of agreements, including margin for the services provided by the agreement as monetary item.
31 In the financial reporting of the organization which issues insurance contracts cash flows on agreement performance shall not consider risk of default on obligations of this organization (risk identification of default on obligations is given in IFRS (IFRS) 13 "Assessment of fair value").
Assessment in case of initial recognition (the Items B36-B 95)
32 In case of initial recognition the organization shall estimate group of insurance contracts as the amount of the following sizes:
(a) cash flows on agreement performance which include:
(i) estimation of future cash flows (Items 33-35);
(ii) adjustment for the purposes of accounting of temporary cost of the money and financial risks connected with future cash flows in that measure in which financial risks are not considered in estimation of future cash flows (Item 36); and
(iii) the risk amendment on non-financial risk (Item 37);
(b) margin for the services provided by the agreement which is estimated according to Items 38-39.
Estimation of future cash flows (Items B36-B 71)
33 In case of group appraisal of insurance contracts the organization shall consider all future cash flows which are within each agreement in this group (see Item 34). According to Item 24 the organization can estimate future cash flows at higher level of aggregation and then which turned out as a result of such assessment cash flows on agreement performance to distribute on separate groups of agreements. The estimation of future cash flows shall:
(a) impartially to use all reasonable and confirmable information on the amounts, terms and uncertainty of such future cash flows (see the Items B37-B 41), available without excessive costs or efforts. For this purpose the organization shall estimate the expected cost (that is the average value weighed taking into account probability) the range of all possible results;
(b) reflect vision of the organization provided that estimates of significant market variables correspond to observed market prices for these variables (see the Items B42-B 53);
(c) be current - the estimation shall reflect the conditions existing for date of assessment including the assumptions about the future made for this date (see the Items B54-B 60);
(d) be obviously expressed - the organization shall perform assessment of the risk amendment on non-financial risk separately from other estimates (see Item B 90). The organization also shall estimate future cash flows separately from adjustment for the purposes of accounting of temporary cost of money and financial risk, except as specified, when the most suitable evaluation method implies consolidation of the specified estimates (see Item B 46).
34 Cash flows are within the insurance contract if they are caused by the valid rights and obligations existing in the accounting period during which the organization can oblige the holder of the policy to pay awards or during which the organization has the valid obligation to provide services to the holder of the policy (see the Items B61-B 71). The valid obligation comes to an end providing services when:
(a) the organization has practical opportunity to revaluate risks on certain holder of the policy therefore she can establish rate or level of benefits which is fully reflected by such risks; or
(b) both are satisfied stated below conditions:
(i) the organization has practical opportunity to revaluate risks on portfolio of insurance contracts which includes this agreement therefore she can establish rate or level of benefits which fully reflect the corresponding risk on this portfolio; and
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