New Global Standard IFRS 17 Triggers Radical Change to Insurance Accounting
Twenty years after the IASB's predecessor initiated the insurance contracts project, the new standard will replace IFRS 4 for accounting periods from
"Four years may seem like a long time, but adequately preparing for the new complexity of IFRS 17 will be a challenge," says
Analysis by
* Interpretation and judgement: IFRS 17 is truly principles-based, which in most cases will mean it is the insurer's responsibility to ensure policies and disclosures comply with the standard's requirements, rather than it being able to rely on prescriptive and detailed rules.
* Dealing with volatility in profits: The hybrid model proposed will increase volatility compared to existing models, particularly those based on locked-in assumptions.
* Managing stakeholder expectations: Explaining IFRS 17's impact on profits and equity, and the variances to current GAAP and reporting under applicable regulatory regimes will require robust processes, a keen grasp of the individual differences and a transparent communication strategy. This may affect dividend-paying capacity, management bonuses and market-wide performance metrics.
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