This first truly international IFRS Standard for insurance contracts will help investors and others better understand insurers’ risk exposure, profitability and financial position.
IFRS 17 replaces IFRS 4, which was brought in as an interim Standard in 2004. IFRS 4 has given companies dispensation to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches. As a consequence, it is difficult for investors to compare and contrast the financial performance of otherwise similar companies.
The Financial Stability Board noted in September 2015 the importance of the Board completing the project to replace IFRS 4 with a new Standard. IFRS 17 solves the comparison problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner, benefiting both investors and insurance companies.
Insurance obligations will be accounted for using current values instead of historical cost. The information will be updated regularly, providing more useful information to users of financial statements.
Due to the range of accounting methods in use today, some countries will see more significant changes than others with the introduction of the new Standard.
IFRS 17 has an effective date of 1 January 2021 but companies can apply it earlier.
Below you find the Standard (not yet EU approved) as well as materials accompanying the Standard: