26.9.2023
EN
Official Journal of the European Union
L 237/867
(b) the contract boundary (see paragraph 34) is modified so that cash flows are within the contract boundary if they result from a substantive obligation of the entity to deliver cash at a present or future date.
The entity has no substantive obligation to deliver cash if it has the practical ability to set a price for the promise to deliver the cash that fully reflects the amount of cash promised and related risks;
(c) the allocation of the contractual service margin (see paragraphs 44(e) and 45(e)) is modified so that the entity shall recognise the contractual service margin over the duration of the group of contracts in a systematic way that reflects the transfer of investment services under the contract.
MODIFICATION AND DERECOGNITION
Modification of an insurance contract 72
If the terms of an insurance contract are modified, for example by agreement between the parties to the contract or by a change in regulation, an entity shall derecognise the original contract and recognise the modified contract as a new contract, applying IFRS 17 or other applicable Standards if, and only if, any of the conditions in (a)–(c) are satisfied.
The exercise of a right included in the terms of a contract is not a modification.
The conditions are that:
(a) if the modified terms had been included at contract inception:
(i) the modified contract would have been excluded from the scope of IFRS 17, applying paragraphs 3–8A;
(ii) an entity would have separated different components from the host insurance contract applying paragraphs 10–13, resulting in a different insurance contract to which IFRS 17 would have applied;
(iii) the modified contract would have had a substantially different contract boundary applying paragraph 34; or
(iv) the modified contract would have been included in a different group of contracts applying paragraphs 14–24.
(b) the original contract met the definition of an insurance contract with direct participation features, but the modified contract no longer meets that definition, or vice versa; or
(c) the entity applied the premium allocation approach in paragraphs 53–59 or paragraphs 69–70 to the original contract, but the modifications mean that the contract no longer meets the eligibility criteria for that approach in paragraph 53 or paragraph 69.
73
If a contract modification meets none of the conditions in paragraph 72, the entity shall treat changes in cash flows caused by the modification as changes in estimates of fulfilment cash flows by applying paragraphs 40–52.
Derecognition 74
An entity shall derecognise an insurance contract when, and only when:
(a) it is extinguished, ie when the obligation specified in the insurance contract expires or is discharged or cancelled; or
(b) any of the conditions in paragraph 72 are met.