First of all, I must say that IFRS is an international financial reporting standard that is effective in over 120 countries around the world. We are currently using IFRS 4, which allows insurance businesses, both life and non-life insurance, to use different accounting methods depending on the country.
Why the change?
Because IFRS 4 still has some loopholes, such as many countries having various measurement standards such as the rules for using GAAP (Generally Accepted Accounting Principles), which means that each country has its own and also uses data that has not been updated to measure results. The International Accounting Standards Committee has met and wants to change to use IFRS 17 as a single standard for financial reporting and accounting for insurance businesses worldwide.
What is IFRS 17?
IFRS 17 is the new standard that will replace IFRS 4 and will be the first standard that will allow insurers who have previously used different accounting policies to measure insurance contracts to a single standard of measurement. For example, revenue that was previously recognized all in one year will now have to be spread out over the number of years the insurance contract is in effect. Therefore, IFRS 17 will provide greater transparency.
What has changed?
IFRS 17 requires updated information to be available, which will be more current, with more transparent reporting and clearer visibility into profits. IFRS 17 will also help to ensure smooth profits and less fluctuations than IFRS 4.
Who is affected?
IFRS 17 is the standard that will be applied to life and non-life insurance contracts. This means that IFRS 17 will affect companies that contract with insurance companies, as well as companies that use IFRS measurement schemes and those that have assets with insurance companies.
When does it start?
IFRS 17 is scheduled to be implemented from 1 January 2021, but some countries can choose to implement it earlier. Thailand plans to start using it in 2022, which is one year later than scheduled.
Now that you’ve read this far, you’re probably wondering why we need to prepare and invest in IFRS 17. If you’re curious, click on the VDO from Tagetik, a partner of Triforce, below.
In conclusion, when this new standard is implemented, the financial statements of life insurance businesses will be able to be compared with non-life insurance businesses. They will also be able to be compared with other businesses, such as banks or financial institutions. To put it simply, when implemented, the information will be more transparent and beneficial to all parties. Therefore, businesses in the insurance group should study information and start investing in solutions that will help your business work more easily.
You can contact Triforce for more information at: 02-235-2312.
References:
https://www.ifrs.org/-/media/project/insurance-contracts/ifrs-standard/ifrs-17-factsheet.pdf
https://www2.deloitte.com/ie/en/pages/financial-services/articles/introducing-ifrs-17.html
https://insurecontrol-solutions.com/ifrs-17-integration
https://siamrath.co.th/n/47608
https://www.mazars.co.th/Home/Doing-Business-in-Thailand/IFRS/Update-on-IFRS-17-Insurance-Contracts
