IFRS 4 Phase II comparison with Solvency II and MCEV

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By Donna McEneaney | 10 June 2015
There are many similarities between IFRS 4 Phase II, Solvency II and MCEV, including using best estimate cash flows to value policyholder liabilities and using market-consistent discount rates. But there are also many differences between the standards. IFRS 4 Phase II, for example, uses a contractual service margin to spread profits over the duration of the contracts. With Solvency II and MCEV, profits are recognised immediately. Solvency II requirements are also more prescriptive than IFRS 4 Phase II and MCEV. The introduction of IFRS 4 Phase II may bring some challenges for companies.