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Getting ready for the new accounting Standard for insurance contracts
One year has passed since the International Accounting Standards Board (Board) issued the new accounting Standard IFRS 17Insurance Contracts. This article provides some background on the new requirements and explains how the Board is helping companies to prepare for the new IFRS Standard.
1. Background
IFRS 17 sets the requirements a company should apply when reporting financial information about insurance contracts it issues and reinsurance contracts it holds.
IFRS 17 is effective from 1 January 2021, with a requirement for companies to provide comparative information for 2020. A company can choose to apply IFRS 17 before that date, but only if it also applies IFRS 9Financial Instruments and IFRS 15Revenue from Contracts with Customers.
As the first truly international accounting Standard for insurance contracts, IFRS 17 will introduce consistency to diverse insurance accounting practices that exist today. Applying IFRS 4Insurance Contracts, an interim Standard, companies are permitted to use local accounting practices which can vary significantly by jurisdiction and by insurance product type. This significant diversity in practice means that it is difficult for investors and others t...