As you may know, after a long period of study, IFRS 17, ‘Insurance Contracts’, which is accepted to be the first comprehensive standard, was issued by the International Accounting Standards Board in May and will become effective from 1 January 2021 via the early adoption option. Thus, a new epoch has begun for insurers.
So far, IFRS 4 has allowed insurance companies to apply their local insurance accounting standards to account for their insurance contracts, and this has resulted in the use of too many different practices. These differences in accounting treatment make it difficult for investors to understand and compare insurers’ performance. IFRS 17 will address the comparability issues of IFRS 4 by requiring consistent accounting of insurance contracts, and thereby help investors and other users understand the risks, profitability and financial performance of the insurers.
IFRS 17 will fundamentally change the accounting for all entities, especially those that issue insurance contracts and investment contracts with discretionary participation features.
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