3. Changes in major accounting policies as well as new and amended standards

With the exception of the following changes, the outlined accounting policies were consistently applied to all periods presented in these consolidated financial statements.

Amendments and standards to be applied for the first time

The Group applied the following amendments to standards, and they were first adopted as at 1 January 2016. None of the new regulations arising from this have any essential impact on UNIQA’s financial position.

IAS 1 – Disclosure initiative

The changes in IAS 1 are meant to ensure that companies, when preparing their consolidated financial statements, put an enhanced focus of their understanding on the question of what information is essential for the consolidated financial accounts and in what order these facts are to be presented.

IAS 19 – Employee benefits

This contains clarification in connection with the defined benefit plans of employees.

Annual Improvements Project 2011–2013

The goal of the annual adjustments to the standards is to clarify the existing regulations. The adjustments concerned IFRS 1, IFRS 3, IFRS 13 and IAS 40.

Annual Improvements Project 2012–2014

The goal of the annual adjustments to the standards is to clarify the existing regulations. The adjustments concerned IFRS 5, IFRS 7, IAS 19 and IAS 34.

New and amended standards to be applied in the future

The IASB has also published a range of new standards that will be applicable in the future. The Group does not intend to apply these standards early.

IFRS 9 – Financial instruments and IFRS 4 – Insurance contracts

The new standard deals with the classification, recognition and measurement of financial assets and financial liabilities. The full version of IFRS 9 was published in July 2014. This standard replaces the regulations of those sections of the existing IAS 39 that address the classification and measurement of financial instruments. IFRS 9 adheres to a mixed measurement model, but it simplifies this and sets out three principal measurement categories for financial assets: measurement at amortised cost, measurement at fair value with value fluctuations recorded in profit/(loss) for the year (fair value through profit and loss) and measurement at fair value with value fluctuations recorded in other comprehensive income (fair value through OCI). The classification depends directly on the company’s business model as well as on the features of the contractually agreed payment flows for the financial assets. Shares of equity instruments must be measured at fair value, with fluctuations in fair value recognised through profit or loss, or with fluctuations in fair value measured through other comprehensive income if the company irrevocably opts to do so upon first-time recognition of the equity instruments (with no subsequent reclassification in net profit for the year).

There is also a new measurement model for impairments based on expected losses (expected credit losses model) which replaces the existing measurement model of actual losses incurred that was used in IAS 39 (incurred loss model). Regarding financial liabilities, there are no changes to classification or measurement, with the exception of mandatory reporting of own creditworthiness risk in other comprehensive income for financial liabilities designated at fair value and recognised in profit/(loss) for the year. The standard applies to reporting periods beginning on or after 1 January 2018. Earlier application is permitted.

In this context, the IASB published amendments to IFRS 4 insurance contracts on 12 September 2016, aimed at addressing the concerns surrounding the different implementation dates of IFRS 9 financial instruments and the expected new standard IFRS 17 for accounting for insurance contracts.

The amendments provide two options to companies that issue insurance contracts within the scope of IFRS 4:

• Companies may reclassify some of the expenses and income from the income statement that emerge from qualified assets as other total comprehensive income. This is known as the overlay approach. A company must apply the overlay approach to qualifying assets retrospectively when it applies IFRS 9 for the first time.
• Companies whose primary business activity involves the awarding of insurance contracts within the scope of IFRS 4 have the option of temporarily deferring their IFRS 9 application. This is known as the deferral approach. According to the amendments that make up the deferral approach, a company is allowed to apply IAS 39 instead of IFRS 9 for reporting periods that begin prior to 1 January 2021.

The business of a company is primarily the underwriting of insurance contracts if the carrying amount of its liabilities arising from insurance contracts within the scope of application of IFRS 4 is significant in relation to the total carrying value of its liabilities and additionally the percentage of all the liabilities that are connected with insurance business makes up at least 90 per cent or between 80 and 90 per cent if the insurer pursues no other significant business that does not relate to insurance business. The assessment of whether the company qualifies for the deferral approach is to be made on the basis of data from 31 December 2015.

At 31 December 2015 UNIQA’s sum of liabilities directly attributable to insurance business amounted to more than 90 per cent. This means that UNIQA fulfils the criterion necessary for applying the deferral approach. The Management Board has decided to apply the deferral approach.

Companies that have chosen the deferral approach must apply it for reporting periods that begin on or after 1 January 2018. From this point onwards the company must disclose how it is qualified for the temporary exception; moreover, it shall provide information that ensures comparability with companies that apply IFRS 9. The deferral approach is limited to three years from 1 January 2018. A re-assessment of the primary line of business would only be required in the event that the company changes its business.

This will have an impact on UNIQA’s consolidated financial statements in relation to the classification and measurement of financial assets. Basically, UNIQA can maintain the valuation categories already established under the scope of IAS 39.

The changeover effects will be due to the new classification of financial instruments according to IFRS 9. On the one hand, compliance with the SPPI criterion (solely payments of principal and interest) is relevant, and on the other, the determination of the respective business model.

Testing the SPPI criterion means evaluating whether the contractual cash flows consist solely of interest and principal payments. If a company is in compliance with the SPPI criterion, the debt instruments are subject to the assessment of which business model to apply. On this basis, the respective financial asset is assigned to the suitable measurement category and is measured accordingly. With the exception of the OCI option for equity instruments, derivatives and equity instruments are recognised at fair value with value fluctuations recorded in profit/(loss) for the year.

The new impairment model (expected credit losses model) according to IFRS 9 will presumably cause significant changeover effects. According to this model, depreciation must be recorded for financial assets classified as fair value through OCI and valued at amortised cost, depending on its default risk and maturity. The quantitative effects of the changeover from IAS 39 to IFRS 9 are currently being evaluated.

IFRS 15 – Revenue from contracts with customers

IFRS 15 governs revenue recognition and sets out the basic principles for reporting of meaningful information on the type, amount, recognition date and uncertainties regarding revenues and payment flows from contracts with customers. Sales revenues are recorded if a customer has control over a delivered item or a service provided and has the ability to enjoy these goods and services and derive benefits from these. The standard replaces IAS 18 and IAS 11 and the associated interpretations. The standard applies to reporting periods beginning on or after 1 January 2017. The IASB grants the company a right of choice with regard to initial application. IFRS 15 can be applied completely retrospectively, i.e. by adjusting the comparison periods, or the cumulative effect resulting from the retrospective application can be recognised as an adjustment to the opening balance of retained earnings (so-called modified retrospective application). UNIQA will use the modified retrospective application as far as IFRS 15 is concerned.

We expect only minor effects on UNIQA’s consolidated financial statements.

IFRS 16 – Leases

The standard replaces IAS 17 and covers the reporting of leases. UNIQA acts both as a lessee and a lessor. There are no adjustments to accounting on the lessor side necessary as a result of the introduction of IFRS 16. For UNIQA as lessee, contracts hitherto classified as operating leases would now be subject to capitalisation. Given that UNIQA acts as lessee only to an insignificant degree, no significant effects are expected to result from the future status of the financial position and profitability. The standard applies to reporting periods beginning on or after 1 January 2019. The IASB grants the lessee a right of choice with regard to the first-time application. With respect to the first-time application of IFRS 16, the company can also choose between a completely retrospective application and a modified retrospective application. UNIQA will choose the modified retrospective application as far as the first-time application of IFRS 16 is concerned.

We expect only minor effects on UNIQA’s consolidated financial statements.

IAS 7 – Cash flow statements

The objective of the amendments is to provide the users of financial statements with better information on the financing operations. This includes additional information on changes in cash and cash equivalent transactions and will result in a broader scope of reporting.

IFRS 2 – Share-based payments

The amendments serve to clarify the classification and measurement of business transactions on the basis of share-based payments.