The end to a much-appreciated relief: Temporary exemption from IFRS 9

Many insurance companies applied the temporary exemption from IFRS 9 Financial Instruments to continue applying IAS 39 Financial Instruments to account for their financial instruments. This was available to entities using IFRS 4 Insurance Contracts until they converted to the new standard IFRS 17 Insurance Contracts. IFRS 17 is effective for years beginning on or after 1 January 2023, the application thereof effectively eliminates the temporary exemption. All companies that apply IFRS 17 to account for their insurance or reinsurance contracts must apply IFRS 9.

The major impact of this change is that financial assets that can no longer be classified as available for sale. Investments must be classified as at fair value through profit or loss, or designated as at fair value through other comprehensive income through an irrevocable election when the instruments meet the fair value through OCI requirements. This is permitted when the underlying investment is an equity instrument and the business model is to hold the investment to collect contractual cash flows and sell financial assets in the case of insurance companies.

The offsetting requirements are also more stringent than the IAS 39 requirements. IFRS 9 was intended to simplify and improve the quality of financial instruments.


Frans Smith, Manager

18 October 2023