Replacement
It will replace IFRS 4 which was an intermediate standard. IFRS 4 was like a quick fix that allowed IASB to buy more time to develop a more comprehensive standard.
Objective
It aims to ensure that insurance contracts are properly accounted for by insurance companies.
Insurance companies should apply it to
a. Insurance contract they issue (to the general public, companies...)
b. Re-insurance contracts they issue (i.e contracts insuring risk insured by another insurance company)
c. Re-insurance contracts it holds (i.e insurance contracts issued to it by other insurance companies
d. Investment contracts provided that it also issues insurance contracts. Investment contract are like certificates of deposit. They evidence a deposit made with the insurance company that'll attract interest.
IFRS 17 or 15???
Some contracts meet the definition of an insurance contract, but, their aim is to provide services for a fixed fee.
An example is the optional nsurance fee that Jumia collects when selling phones. It is an insurance contract, yes. Also, the aim is to provide phone repair services (in theory) at a fixed fee.
In a case like this, Jumia can account for this income using IFRS 17 (as an insurance contract) or IFRS 15 (as revenue).
However, 3 conditions have to be met before it can account for it can account for it as revenue:
a. It doesn’t consider individual risk when setting the price. Jumia doesn't consider whether buyer A's screen is more likely to break than buyer b's when setting it's phone insurance premium.
b. Compensation is in form of a service and not monetary. Jumia won't pay money if the insured phone spoils, it can replace/repair.
c. Insurance risk arises from use of services rather than uncertainty over their cost. Jumia already knows how much it will repair a phone will cost. The risk it is exposed to is that the customer will actually make a claim.
Therefore, Jumia can use either IFRS 15 or IFRS 17 to account for the phone insurance income