IASB issued IFRS 17 – Insurance Contracts

The International Accounting Standards Board has issued IFRS 17 Insurance Contracts. This first truly international IFRS Standard for insurance contracts will help investors and others better understand insurers’ risk exposure, profitability and financial position.

History of the project (Summery)

It is developed to replace IFRS 4

Why?

Because IFRS 4 has allowed insurers to use deferent accounting policies to measure similar insurance contracts they write not only in deferent countries but also in the some country and some insurance firm.

IFRS 17, on the other hand, has provided consistent principles for all aspects of accounting for insurance contracts. It removes existing inconsistencies and enables investors, analysts and others to meaningfully
compare companies, contracts and across industries.

When is the effective date?

1 January 2021 with early adoption is allowed but only if it also applies IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.

Who is affected?

Mainly those who write insurance contract; as usual IFRS is not sector specific.

What Changes?

IFRS 17 requires a company to measure insurance contracts using updated estimates and assumptions that avoid the timing of cash flows and any uncertainty relating to insurance contracts. This requirement will provide transparent reporting about a company’s financial position and risk.

IFRS 17 requires a company to recognize profits as it delivers insurance services (rather than when it receives premiums) and to provide information about insurance contract profits the company expects to recognize in the future.