Need for IFRS 17

[Rishabh SuranaModerator]

Why IFRS 17 has been developed?

• This topic was modified 5 years, 10 months ago by Rishabh Surana.

[Rishabh SuranaModerator]

Need for a Financial Reporting Standard in Insurance:
The insurance industry plays a central role in the global economy. Insurers, like other institutional investors are an important long-term investors. Thus, proper accounting for insurance contracts is of crucial importance.

The nature of their business exposes insurers—and investors in insurers—to many risks. This is why the financial statements of insurers need to reflect insurance risks, and changes in those risks, in a timely and transparent way.

IFRS 4 provides guidance for the accounting of Insurance contracts. But now IFRS 17 will replace IFRS 4 – an Interim Standard.

Need for IFRS 17:
The major drawback of IFRS 4 is that it does not address how to measure insurance contracts.
For ex: Long term Insurance contract involves a significant deposit component and complex risks. Also, they are typically not traded in market and thus, it is difficult to measure them. Even the existing Insurance accounting practices fails to reflect the true financial positions or performance arising from these contracts.

Also, differences in accounting treatment across jurisdictions and products have made it difficult for investors and analysts to understand and compare insurers’ results. Thus, IFRS 17 tries to address all these issues.

• This reply was modified 5 years, 10 months ago by Rishabh Surana.

[Mayank Goyal FIAParticipant]

By when can we expect it to be implemented in India and worldwide?

[Rishabh SuranaModerator]

The International Accounting Standards Board (IASB) had deferred the effective date of IFRS 17 to 1st January 2023.
In India, I feel the effective date of implementation would be decided by IRDAI after the finalisation of IFRS 17 by IASB.

[Mayank Goyal FIAParticipant]

It has been few years now since we have been hearing that 💁‍♂️

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