(paragraphs 74-75 of IFRS 17)

BC321 IFRS 17 requires an entity to derecognise an insurance contract liability from its statement of financial position only when it is extinguished or modified in the way discussed in paragraph BC317. An insurance contract is extinguished when the obligation specified in the insurance contract expires or is discharged or cancelled. This requirement is consistent with requirements in other IFRS Standards, including the derecognition requirements for financial liabilities in IFRS 9. The requirement also provides symmetrical treatment for the recognition and derecognition of insurance contracts.

BC322 The Board considered concerns that an entity might not know whether a liability has been extinguished because claims are sometimes reported years after the end of the coverage period. It also considered concerns that an entity might be unable to derecognise those liabilities. Some argued that, in some cases, the delayed derecognition would result in unreasonable and unduly burdensome accounting. In the Board's view, ignoring contractual obligations that remain in existence and that can generate valid claims would not give a faithful representation of an entity's financial position. However, the Board expects that when the entity has no information to suggest there are unasserted claims on a contract with an expired coverage period, the entity would measure the insurance contract liability at a very low amount. Accordingly, there may be little practical difference between recognising an insurance liability measured at a very low amount and derecognising the liability.