BC195 Some respondents suggested that financial instruments issued by one entity to a life insurer in the same group should not be eliminated from the group’s consolidated financial statements if the life insurer’s assets are earmarked as security for policyholders’ savings.

BC196 The Board noted that these financial instruments are not assets and liabilities from the group’s perspective. The Board saw no justification for departing from the general principle that all intragroup transactions are eliminated, even if they are between components of an entity that have different stakeholders, for example policyholder funds and shareholder funds. However, although the transactions are eliminated, they may affect future cash flows. Hence, they may be relevant in measuring liabilities.

BC197 Some respondents argued that non‑elimination would be consistent with the fact that financial instruments issued can (unless they are non‑transferable) be plan assets in defined benefit plans under IAS 19 Employee Benefits. However, the Board did not view IAS 19 as a precedent in this area. IAS 19 requires a presentation net of plan assets because investment in plan assets reduces the obligation (IAS 19 Basis for Conclusions paragraph BC66). This presentation does not result in the recognition of new assets and liabilities.