The European Union's endorsement of Amendments to International Financial Reporting Standard 4: An unprecedented “top up”

Date01 July 2020
Published date01 July 2020
AuthorMichael Dobler
The European Union's endorsement of Amendments
to International Financial Reporting Standard 4:
An unprecedented top up
Michael Dobler
Faculty of Business and Economics,
Technische Universität Dresden, Dresden,
Michael Dobler, Technische Universität
Dresden, Faculty of Business and
Economics, Chair of Accounting,
Auditing and Taxation, 01062 Dresden,
The International Financial Reporting Standards (IFRS) must pass a formal
endorsement process to become binding for companies based in the European
Union (EU). In an unparalleled instance, the EU recently endorsed Amend-
ments to IFRS 4with a modification labeled as top upby allowing European
financial conglomerates to defer the application of IFRS 9 Financial Instru-
mentsin their insurance sectors. This paper explains the background of this
decision, identifies the top upas an unprecedented case of carve-in, and dis-
cusses the key implications for regulation and practice.
carve-in, European Union (EU), financial conglomerate, financial instruments, insurance,
international accounting, International Financial Reporting Standards (IFRS), top up
In the European Union (EU), Regulation (EU)
2017/1988 endorsed Amendments to IFRS 4: Applying
IFRS 9 Financial Instruments with IFRS 4 Insurance
Contracts(International Accounting Standards Board
[IASB], 2016) with a modification of their original con-
tent. The protocols of EU deliberations refer to the
modification as an EU top up,a new term in the
International Financial Reporting Standards (IFRS)
endorsement process. In brief, this top upextends
the scope of an optional temporary exemption from
IFRS 9 from predominate insurers to the insurance sec-
tors of EU-based financial conglomerates. What seems
to be a minor adjustment at first glance is an unprece-
dented case in the history of IFRS endorsement in the
EU. It is surprising how little attention academics and
practitioners have devoted to this unique case, which
has passed almost unnoticed beyond an inner circle of
European experts in insurance accounting.
What is the economic and political background of the
EU top up?Isthistop upnot, in fact, a carve-in? What
are its implications for financial accounting regulation and
practice? To address the above questions, this paper sum-
marizes the deliberations and key arguments that led to
the top upand analyzes the characteristics of the scope
extension provided by the top up.My discussion of the
regulatory implications centers on power arguments and
the potential impact on future EU endorsement decisions.
By discussing the implications for preparers and users of
financial statements, I provide the initial evidence on how
many and which financial conglomerates actually chose to
exempt themselves from IFRS 9 in their insurance sectors.
The findings add to our understanding of the politics of
adopting IFRS in the EU and suggest obstacles to IFRS
financial statement analysis in insurance-related sectors.
Received: 8 August 2019 Revised: 21 October 2019 Accepted: 26 November 2019
DOI: 10.1002/jcaf.22436
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided
the original work is properly cited.
© 2019 The Author. Journal of Corporate Accounting & Finance published by Wiley Periodicals, Inc.
190 J Corp Acct Fin. 2020;

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