IFRS 17 – the new standard for insurance contracts
The International Accounting Standards Board (IASB) issued IFRS 17, the new standard for insurance contracts, in May 2017.
IFRS 17 Insurance Contracts 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 interim standard IFRS 4 Insurance Contracts, which was introduced in March 2004. IFRS 4 was supposed to limit changes to existing insurance accounting practices. It allowed insurers to use different accounting policies to measure similar insurance contracts written in different countries but it was difficult for investors to compare and contrast the financial performance of similar companies.
IFRS 17 addresses the comparison problems created by IFRS 4. It provides consistent principles in accounting for insurance contracts, which 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 giving 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, contact:
Michelle Vassallo Pulis
Nexia BT, Malta
T: +356 2163 7778