Optional scope choices

Learning objectives

• Explain that an entity may, subject to conditions, choose between two Standards for certain fixed-fee service contracts and certain loan or credit card contracts.L2
• Assess, from the facts of a case, whether the conditions for the choice are met and what consequence the choice entails.L3

Normative references

• IFRS 17 §8An entity may choose, contract by contract and irrevocably, to apply IFRS 15 rather than IFRS 17 to fixed-fee service contracts that meet the definition of an insurance contract, if it does not reflect an assessment of the risk associated with an individual customer in setting the price, the contract compensates the customer by providing services rather than cash payments, and the insurance risk transferred arises primarily from the customer's use of services rather than from uncertainty over their cost.
• IFRS 17 §8AFor insurance contracts whose compensation is limited to the amount required to settle the policyholder's obligation (for example a loan settled on the death of the borrower), the entity chooses IFRS 17 or IFRS 9, portfolio by portfolio and irrevocably, unless excluded by para. 7; credit cards fall within the exclusion in para. 7(h), not within this paragraph.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• Dépannex SA sells an annual roadside assistance package at the same price to all its customers, whatever their risk profile (case data). When a breakdown occurs, it provides a repair service in kind and pays no cash; the insurance risk arises mainly from the customer's use of the service. What may Dépannex do under the scope of IFRS 17?L2