(paragraphs 14-24 of IFRS 17)

BC126 The Board noted that entities could interpret the approach described in paragraphs BC124-BC125 as requiring an excessively large number of groups that may provide insufficiently useful information to justify the operational burden that would be imposed by extensive disaggregation of portfolios. Accordingly, the Board sought a balance to reflect profit and potential losses in the statement of financial performance in appropriate periods and the operational burden.

BC127 To achieve that balance, the Board concluded that an entity should be required to identify portfolios of contracts subject to similar risks and managed together, and to divide a portfolio into, at a minimum, groups of:

(a) contracts that are onerous at initial recognition, if any;

(b) contracts that are not onerous at initial recognition and that have no significant possibility of becoming onerous subsequently, if any; and

(c) all other contracts, if any.

BC128 The same principle of grouping applies to insurance contracts to which the premium allocation approach applies and to reinsurance contracts held, but the wording is adapted to reflect their specific characteristics.