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The IASB issues IFRS 17, Insurance Contracts

01.06.2017

On 18 May 2017, the International Accounting Standards Board (IASB) issued IFRS 17, Insurance Contracts. It sets out a comprehensive methodology applicable to all insurance and reinsurance contracts, both long- and short-term, as well as investment contracts with discretionary participation features.

IFRS 17 replaces the interim standard, IFRS 4, Insurance Contracts, which was introduced in March 2004. IFRS 4 was meant to limit changes to existing insurance accounting practices. Hence, it allowed insurers to use different accounting policies to measure similar insurance contracts they write in different countries. As a consequence, it was difficult for investors to compare and contrast the financial performance of similar companies.

IFRS 17 addresses these comparison problems created by IFRS 4. It provides consistent principles in accounting for insurance contracts. This will benefit both investors and insurance companies. Insurance obligations will be accounted for using current values, not historical cost. The information will be updated regularly, providing more useful information to users of financial statement and a better understanding of insurers’ risk exposure, profitability, financial position and cash flows.

IFRS 17 is effective from 1 January 2021. A company may choose to apply IFRS 17 before that date but only if it also applies IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.

For more information regarding the application of the relevant IFRS standard, you may reach out by sending an email to:

Darren Bugeja | Director | Nexia BT | darren.bugeja@nexiabt.com.