(paragraphs 4(b) and 71 of IFRS 17)

BC82 The Board decided that issuers of investment contracts with discretionary participation features should apply IFRS 17 to those contracts provided that the issuer also issues insurance contracts. Because investment contracts with discretionary participation features do not transfer insurance risk, the requirements of IFRS 17 are modified for such contracts.

BC83 Although investment contracts with discretionary participation features do not meet the definition of insurance contracts, the advantages of treating them the same as insurance contracts rather than as financial instruments when they are issued by entities that issue insurance contracts are that:

(a) investment contracts with discretionary participation features and insurance contracts that specify a link to returns on underlying items are sometimes linked to the same underlying pool of assets. Sometimes investment contracts with discretionary participation features share in the performance of insurance contracts. Using the same accounting for both types of contracts will produce more useful information for users of financial statements because it enhances comparability within an entity. It also simplifies the accounting for those contracts. For example, some cash flow distributions to participating policyholders are made in aggregate both for insurance contracts that specify a link to returns on underlying items and for investment contracts with discretionary participation features. This makes it challenging to apply different accounting models to different parts of that aggregate participation.