Question ID: 1922
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 35
Template: S.06.02
Status: Final
Date of submission: 13 Sep 2019
Question
We would like to clarify the treatment of IFRS 16 "Right of Use" assets in EBS and SCR, could you please confirm that our understanding is correct?
Acc. to EU 35/2015 assets and liabilities shall be recognized in conformity with the international accounting standards, therefore we believe that RoU assets should be reported in S.06.02 with CIC XT93 (e.g. rented buildings) or XT95 (e.g. vehicles).
As IFRS 16 is nothing else but a balance sheet extension, the value of RoU Assets is based on the discounted future payments (the lessee doesn’t participate on the value changes of the leased assets) and to avoid double-counting of risks (at lessor and lessee), we believe that the RoU assets should be subject to the interest rate shock submodule (independent of the sort of the leased assets).
EIOPA answer
On the first part, your interpretation is correct, rights of use should be reported in all relevant templates, including S.06.02, according to the nature of the underlying asset.
On the second part, SCR calculation follows the nature of the assets recognized according to IFRS principles. For example, if the leased asset is a building, the lessee would recognize the right of use as a building. Therefore, property risk module would be the relevant risk module for SCR calculation.