IFRS 17, 'Insurance Contracts', specifies that some participating contracts should be accounted for using the variable fee approach ('VFA'), to reflect that those contracts provide investment-related services which are integrated with insurance coverage, and that the entity receives a variable fee for those services. Given the difference in accounting between the VFA and the general model applied to other contracts, the determination of eligibility for the VFA will have a significant effect on system requirements and reported results. There are a number of key interpretative questions and significant judgements in determining eligibility. This publication summarises the criteria for testing the eligibility for the VFA and the accounting for contracts applying the VFA, along with frequently asked questions ('FAQs').
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