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IFRS 4


 IFRS 4 is the financial reporting standard of insurance contract accounting. It has following simple rules.

1st Rule. Definition of Insurance Contract

One party  that insurance company will accept the insurance risk and other party is insurance holder will pay premium 

2nd Rule . Insurance Risk Vs Financial Risk

Insurance company will cover only insurance risk cover under insurance contract not financial risk.  Financial assets and financial liabilities of insurance company will cover under IFRS 9 

3rd Rule :  Relating to Changing in Accounting Policies 

Insurance company need to follow other some IFRS like requirement relating to changing in accounting policies. 

4th Rule : Test of insurance liabilities is must. 

Means As accountant, you have to see insurance assets fulfill the liability of insurance liabilities or not. Test of adequacy can be done with capital adequacy ratio.  

Insurance liabilities will show in the balance sheet of insurance company upto the time of discharge or cancelled by policy holder or expire and it never offsetting against related reinsurance assets. 

5th Rule Insurance control relating to embedded derivatives contracts

Insurance control relating to embedded derivatives contracts measured at fair value separately which is not included in same insurance contract and will come under IFRS 9

6th Rule :  embedded derivatives contracts definition 

embedded derivatives contracts does not come under the definition of insurance contract under IFRS 4

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Accounting Education: IFRS 4
IFRS 4
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Accounting Education
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