(paragraphs C20-C24 of IFRS 17)

BC385 The Board noted that in some cases an entity might not have reasonable and supportable information available without undue cost or effort to apply the modified retrospective approach. Accordingly, the Board specified that in such cases, an entity must apply a fair value approach in which the contractual service margin at the transition date is determined as the difference between the fulfilment cash flows and the fair value of the group of insurance contracts, determined in accordance with IFRS 13. The Board also decided to allow the use of the fair value approach whenever retrospective application is impracticable (see paragraph BC373). The Board decided to clarify that in determining fair value of a group of insurance contracts, an entity should not apply the concept of a deposit floor (see paragraphs BC165-BC166).

BC386 The fair value approach also permits the same modifications as the modified retrospective approach relating to:

(a) assessments about insurance contracts or groups of insurance contracts that would be made at the date of inception or initial recognition [An entity applying the fair value approach is permitted to classify as a liability for incurred claims a liability for the settlement of claims incurred before an insurance contract was acquired in a transfer of insurance contracts that do not form a business or in a business combination within the scope of IFRS 3 (see paragraph BC382A).]; and