By Gary Kabureck, Member, International Accounting Standards Board
Existing accounting practices in the insurance industry are widely perceived as opaque and inconsistent. For companies applying IFRS Standards, the accounting for insurance contracts currently differs significantly from the accounting for other contracts. This diversity poses unnecessary difficulties for potential investors.
In 2017, the International Accounting Standards Board (Board) issued a new IFRS Standard to help address these and other concerns about the accounting for insurance contracts. IFRS 17 Insurance Contracts—which companies will apply in 2021—is the first truly international standard for insurance contracts. Although the requirements in IFRS 17 are very different to existing accounting for insurance contracts in most of the world, they are based on well-known principles from other IFRS Standards. So IFRS 17 will help reduce the comparability gap between the accounting in the insurance industry and the accounting in other industries.
This article outlines the similarities between the following key requirements in IFRS 17 and those in other IFRS Standards:
the measurement of obligations at current value; and
the recognition of revenue as a company provides services to its customers.