(paragraph 30 of IFRS 17)

BC277 When applying IAS 21 The Effects of Changes in Foreign Exchange Rates, the fulfilment cash flows are clearly monetary items. However, the contractual service margin component might be classified as non-monetary because it is similar to prepayments for goods and services. The Board decided that it would be simpler to treat all components of the measurement of an insurance contract denominated in a single currency as either monetary or non-monetary. Because the measurement in IFRS 17 is largely based on estimates of future cash flows, the Board concluded that it is more appropriate to view an insurance contract as a whole as a monetary item.

BC278 Accordingly, IFRS 17 requires an insurance contract to be treated as a monetary item for foreign currency translation in applying IAS 21. This applies for both the fulfilment cash flows and the contractual service margin. The Board's conclusion that the insurance contract is a monetary item does not change if an entity measures a group of insurance contracts using the simplified approach for the measurement of the liability for remaining coverage.