2023 is a very important year for the insurance industry: The complex IFRS 17 framework was set in force on 1st January 2023 and replaces the interim standard IFRS 4 Phase I, which has been in force since 2005. The new standard regulates the principles for identification, recognition, measurement, presentation and disclosures for insurance contracts.
Alma is going to accompany the implementation of IFRS 17 by the insurance industry. Therefore, Alma will publish from time to time brief and well understandable articles on IFRS 17.
Part 1: History of IFRS 17
It has been a long journey…
After more than 20 years of the project, the time had come: On 18 May 2017, the IASB (International Accounting Standard Board) published the new international accounting standard for insurance contracts, IFRS 17.
However, this was not the end of the story. As is usual with other newly developed IFRSs, a Transition Resource Group (TRG), a public forum for representatives of the insurance industry, was set up to discuss open issues regarding the implementation of IFRS 17. The TRG’s concerns and the resulting proposed changes prompted the IASB to postpone the implementation date and give companies more time. Based on the TRG’s proposals, the IASB published the “Amendments to IFRS 17” on June 25, 2020. As a result, the adoption date has now been postponed to Jan. 1, 2023.
The next hurdle was the implementation of the new standard in EU law (so-called endorsement). As part of this process, the European Financial Reporting Advisory Group (EFRAG) submitted an endorsement recommendation on March 31, 2021, following appropriate stakeholder consultation. This was followed by the Vote for Endorsement by the Accounting Regulatory Committee (ARC) on July 16, 2021. The European Commission has now followed EFRAG’s endorsement recommendation including a temporary exemption regarding the formation of annual cohorts.