IFRS 17 initially required to fully and immediately allocate the directly attributable acquisition costs to a group of contracts, even when part of these costs was related to expected contracts renewals that were to be recognised in the future. The IFRS 17 amendment now requires the allocation of a part of these costs to related expected contracts renewals. This portion of acquisition costs paid will be continuously recognised as an asset until expected renewals of those initial insurance contracts are recognised in the future.
As a result of this amendment, assets for insurance acquisition cash flows will be of a longer duration and of a larger amount. In exchange, an impairment test will be performed, and an additional disclosure will be required for these assets.
This amendment is expected to ease the understanding of the results by preventing the presentation of some insurance contracts as loss-making because of the excess of acquisition costs over the premium of the initial contract, while renewals are expected.