Actuary David Rush reports on the proposed one-year deferral of the effective date of IFRS 17, to 1 January 2022.
In May 2017, after many years gestation, the International Accounting Standards Board (IASB) released a final version of a new international accounting standard for insurance contracts, IFRS 17 Insurance Contracts. The new standard applies for reporting periods starting on 1 January 2021 or later.
However, the IASB voted on 14 November 2018 to propose a one-year deferral of the effective date of IFRS 17, to 1 January 2022. This proposed deferral is subject to public consultation in 2019.
The IASB also announced an extension of the temporary deferral of IFRS 9 implementation for insurers to 2022 so that the dates for implementation of the two accounting standards coincide.
In July 2017, the Australian Accounting Standards Board (AASB) released AASB 17. It is based on, and is almost identical to, the international standard. It is expected that the implementation date for that will be similarly delayed.
The IASB engaged in extensive consultation in the development of IFRS 17, and to support insurers and others with the transition to the new standard, it set up a Transition Resource Group (TRG). Through that forum, and elsewhere, the IASB received feedback that there were many areas of concern with the standard, and numerous uncertainties still to be resolved. Many global stakeholders advised that they faced “serious operational constraints” on their ability to meet the original 2021 date. These groups also called for improvements before IFRS 17 comes into force.
The IASB has stated that the decision to delay implementation acknowledges this feedback and is in response to comments that implementation not be unduly disrupted. The IASB intends that this decision provide a clear direction, and help companies with their planning.
The IASB expressed concerned that revisions could undermine some of the standard’s core principles and disrupt existing plans. However, it seems open to making changes to address some of the uncertainties raised, and some small changes to the standard are expected to be approved at the IASB’s December 2018 meeting. These changes will need to be reviewed before the impact of the one-year delay can be properly assessed.
Many insurers will welcome the move to delay implementation, but others have warned that firms must continue to press ahead with their planning. Many companies still have a lot to do and cannot afford to slow down, although, the additional time will help alleviate some risk from existing plans.
The new standard relies heavily on the work of actuaries, and so in 2017 the Actuaries Institute established a task force (TF) to help actuaries prepare for its implementation. The TF decided that the most useful way of providing support initially would be through an Information Note (IN). Initial versions of this IN have already been published, and, despite this delay, a further version is expected in December 2018.
An IFRS 17 and AASB 17 information and resource page for Members has been set up here. It contains links to the various IN versions.
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