EU insurers call for IFRS 9 change to allow for reported profit clarity

Written by Adam Cadle

17/01/2022

Europe’s insurers are calling for a change in IFRS 9 to allow recycling for equities measured at fair value through other comprehensive income (FVOCI) to help ensure that profit and loss correctly reflects financial performance for all long-term investors.

Insurance Europe and the CFO Forum have written jointly to the European Financial Reporting Advisory Group (EFRAG) and the International Accounting Standards Board (IASB) regarding the post implementation review of IFRS 9 – financial instruments. Insurance Europe said: “Allowing the recycling of realised gains or losses to profit or loss would remove the existing accounting disadvantage for long-term equity investments for FVOCI users and further bring IFRS 9 in line with the IASB’s Conceptual Framework.

“The prohibition of recycling creates the false impression that cumulative gains and losses at the time of disposal of equity instruments are not relevant or economically significant, and therefore not a part of financial performance,” it added.

“In fact, yields from capital gains have been larger historically than dividends and are therefore more relevant. They are also a fundamental reason for investing in equities and such long-term investments are a key element of the insurance business model.”

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