It took a while, but finally the time had come. Starting in 2021, some insurers had to start complying with the IFRS 17 standard. So this is not a very long time ago. For some people a familiar term, for some people perhaps something very unfamiliar and new. However it may be for you, we would like to explain in this article what exactly the IFRS 17 standard entails. Please read this article for more information.
IFRS 17 standard and its introduction
As you could read in the introduction, it took a while before this regulation was finally through. IFRS 17 is the replacement for IFRS 4. To know exactly what this is – no matter how much prior knowledge you already have – we need to look a little further. Namely, to FRS. What exactly is that? FRS is an international reporting standard for insurance products, designed to ensure that annual reports are more comparable worldwide. That’s important! The approach of the new IFRS 17 that may apply as of 2021 is that, in principle, the same rules will apply as much as possible. Of course that is not always possible, but that is the aim.
IFRS 17 is a replacement, but the old version already included the accounting policies for insurance liabilities. It was somewhat complex, so part of it had been postponed earlier. So you see, complexity can cause a lot of postponement. After all, you do want to do it right, don’t you?
However, there is no more postponement now, as IFRS 17 was published in May 2020. Ideal! Note that the implementation of the standard must be completed by the end of 2021. What that means in practice? A lot, because in practice insurers have to come up with comparative figures in the financial statements for 2021, for the year before, namely 2020. In addition, insurers have to start estimating all incoming and outgoing costs. We are talking about all incoming and outgoing cash flows that will take place in the future. It is important that all costs will be valued on current data. Complicated? It may be, fortunately there are specialists in this field available to you. Of course, the cash flows that the insurer puts on its books have to be ‘discounted’. For this purpose, insurers use current interest rate curves. There is more to tell about IFRS 17, but we don’t want to make it too difficult for you.
To conclude
You’ve been able to read a little bit about what IFRS 17 is. Of course there is a lot more information to tell about it.
Want to read more or get started right away? You can also check out a lot of information at www.annualreporting.info! In particular, let us know if you think many people are meeting this new standard, or if they are not.
In fact, it is always useful to keep track of any other data of our visitors in addition to the existing surveys. Nice touch, right? In any case, we look forward to your response.