A consultation on pushing back IFRS 17 is expected, after the International Accounting Standards Board voted to postpone the implementation of the global accounting standards to 2022.
The IASB is meeting in London today and tomorrow. As part of today’s discussion, its 14 board members reached a unanimous decision to delay the roll out of the worldwide IFRS 17 accounting standards until 1 January 2022.
The recommendation is not yet set in stone, as it first needs to be released on an official document. It is likely to be subject to a consultation, it is understood.
IFRS 17 is intended to replace IFRS 4 on insurance contracts accounting and better align insurance reporting with that of other sectors.
Insurers are expected to welcome the move, though nine insurance associations had called for a two year delay in a letter to the board. This is despite 90% of insurers approached by Deloitte for its Global IFRS Insurance survey 2018 saying they felt they were ‘somewhat’ or ‘very’ confident that they would be prepared for the changes by 2021.
Francesco Nagari, global IFRS insurance leader at Deloitte, said: “Today’s decision from the IASB, confirming its intention to propose a 12-month deferral of IFRS 17 and a parallel shift of the deferral in IFRS 9 mandatory adoption, will be largely welcomed by insurers.”
“Substantial effort is already underway to implement the standards, with budgets in some instances expected to exceed €50m. Investors and regulators eagerly await the benefits of having a single, universal accounting language that IFRS 17 promises, with improved transparency and comparability of insurer’s financial results. However, the additional year proposed to be granted today will give insurers the extra time they have requested to oversee preparations, and a reasonable compromise between the two stakeholders groups,” Nagari added.
Mazars partner Lionel Cazali added: “These decisions were expected by the preparers, who were even pushing for a 2 years extension period. However, the expectations remain high on the areas of the standard which may be reopened to address the concerns of the industry.”
Insurance Europe welcomed the move to adjust the timing of IFRS 17, but argued that one year is not enough time for insurers to be adequately prepared, or for “problems” with the regulation to be fixed.
Olav Jones, deputy director general of Insurance Europe said: “While it is good that the IASB Board has — at last — recognised the need to consider improvements and a delay to IFRS 17, as well as adjusting the timing of IFRS 9 to keep it aligned, one year is simply not enough time to both fix the problems with IFRS 17 and to give insurers enough time to implement the standard properly.”
Similar sentiments were echoed by Andrew Carpenter, senior policy adviser, financial reporting at the Association of British Insurers. He said: “The new IFRS 17 accounting standards for insurance contracts is complex and operationally challenging, and it will substantially change how insurers report their financial results. The IASB’s decision to delay the effective date by a year is welcome, but it does not meet the industry’s extensive field-testing based call for a two year delay so that the IASB can address some significant technical flaws in the standard and insurers can implement the resulting standard successfully.”
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