Page 115 - EXIM-Bank_Annual-Report-2022

A VISION COMMITMENT EMPOWERING ENSURING ENHANCING FINANCIAL
TO SERVE TO LEAD GROWTH SUSTAINABILITY GOVERNANCE STATEMENTS 113

Notes to the fiNaNcial statemeNts

2. sIGNIFICANt ACCouNtING PoLICIes (cont’d.)
2.3 Standards issued but not yet effective (cont’d.)

MFRS 17 Insurance Contracts (cont’d.)
(i) Changes to classification and measurement (cont’d.)

The adoption of MFRS 17 is not expected to change the classification of the Group’s and the Bank’s insurance
contracts/takaful certificates. Under MFRS 17 the Group and the Bank is required to (cont’d.):
- Recognise and measure groups of insurance contracts/takaful certificates at a risk-adjusted present value of the
future cash flows (the fulfilment cash flows), that incorporates all available information about the fulfilment cash
flows in a way that is consistent with observable market information plus an amount representing the unearned
profit in the group of contracts/certificates (the contractual service margin or “CSM”);
- Recognise profit from a group of insurance contracts/takaful certificates over the period the Group and the
Bank provides insurance coverage. If a group of contracts is expected to be onerous (i.e. loss making) over the
remaining coverage period, the Group and the Bank recognises the loss immediately; and
- Recognise an asset for insurance/takaful acquisition cash flows in respect of acquisition cash flows paid, or
incurred, before the related group of insurance contracts/takaful certificates is recognised. Such an asset is
derecognised when the insurance acquisition cash flows are included in the measurement of the related group
of insurance contracts/takaful certificates.

MFRS 17 provides comprehensive guidance on accounting for insurance contracts/takaful certificates issued,
reinsurance contracts/retakaful certficates held, and investment contracts with discretionary participation features
through three new measurement models. The Group and the Bank intends to apply the following measurement
models in measuring the various insurance contracts/takaful certificates it issues:-
(a) Premium Allocation Approach (“PAA”)

For those policies/certificates with contract boundary of less than one (1) year coverage period and that pass
the PAA eligibility test.
(b) General Measurement Model (‘’GMM’’)

GMM is the default measurement model for policies/certificates valued using fulfilment cash flows (the present
value of expected cash flows, plus a risk adjustment), offset by the contractual service margin which represents
unearned profit the insurer recognises as it provides services under the contract.
The Bank has preliminary assessed the impact arising from adoption of MFRS 17 and, also taking into consideration
the scope in MFRS 17.7(h), it has concluded that the impact to retained earnings will be from the range of RM1.10
million to RM2.30 million.