General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
July 05, 2018

Gary Kabureck of IASB published a feature that examines reducing the gap between insurance and other industries. For companies applying IFRS Standards, the accounting for insurance contracts differs significantly from the accounting for other contracts. The article outlines the similarities between the key requirements in IFRS 17 and those in other IFRS standards. These key requirements include the measurement of obligations at current value and the recognition of revenue as a company provides services to its customers.

IFRS 17 requires an insurer to report on the balance sheet its obligations from insurance contracts as the total of fulfillment cash flows and contractual service margin. The author points out that measurement of an insurer’s obligations at current value is consistent with the requirements in IAS 37 on provisions, contingent liabilities, and contingent assets for provisions and with those in IFRS 9 on financial instruments for financial liabilities. Recognition of profit at the time services—such as insurance coverage—are provided is consistent with IFRS 15 on revenue from contracts with customers. Insurance obligations can also be regarded as having two components: liability for remaining coverage—measurement of which is broadly consistent with IFRS 15; and liability for incurred claims—measurement of which is broadly consistent with IAS 37.

IFRS 17 requires insurers to present, in the income statement, the revenue for insurance services determined in a way that is consistent with the general principles in IFRS 15. IFRS 17, consistent with IFRS 15, requires that the balance sheet reports the insurance obligations and the income statement reports progress toward satisfying the performance obligation in the contracts. The obligations to repay deposits to the policyholder, if not included in an insurance contract, would be measured and presented in accordance with IFRS 9. When a deposit is interrelated with the obligation to provide insurance coverage it is measured in accordance with IFRS 17. However, it would not faithfully represent the similarities between financial instruments within the scope of IFRS 9 and deposits embedded in insurance contracts within the scope of IFRS 17 if an insurer were to present the receipts and repayments of such deposits as insurance revenue and incurred claims. Accordingly, the requirements in IFRS 17 exclude such deposits from insurance revenue and incurred claims.

Overall, the author believes that IFRS 17 on insurance contracts will help reduce the comparability gap between the accounting in the insurance industry and the accounting in other industries. The author believes that changes introduced by IFRS 17 will enable a wider range of users to understand insurers’ financial statements and compare them with the financial statements of companies within and outside the insurance industry. As with the revenue in any other industry, insurance revenue will exclude deposits and reflect only the services provided. Apart from facilitating cross-industry comparability, this change will make easier for non-specialist investors to understand insurers’ income statement.

Keywords: International, Insurance, Accounting, Banking, IFRS 17, IFRS 9, IFRS 15, IAS 37, Insurance Obligations, Presentation of Revenue, IASB

Related Insights
News

BCBS Finds Liquidity Risk Management Principles Remain Fit for Purpose

BCBS completed a review of its 2008 Principles for sound liquidity risk management and supervision. The review confirmed that the principles remain fit for purpose.

January 17, 2019 WebPage Regulatory News
News

HKMA Urges Local Banks to Start Working on FRTB Implementation

HKMA announced that it plans to issue a consultation paper on the new market risk standard in the second quarter of 2019.

January 17, 2019 WebPage Regulatory News
News

EBA Finalizes Guidelines for High-Risk Exposures Under CRR

EBA published the final guidelines on the specification of types of exposures to be associated with high risk under the Capital Requirements Regulation (CRR). The guidelines are intended to facilitate a higher degree of comparability in terms of the current practices in identifying high-risk exposures.

January 17, 2019 WebPage Regulatory News
News

MAS Guidelines on Risk Mitigation Requirements for OTC Derivatives

MAS published guidelines on risk mitigation requirements for non-centrally cleared over-the-counter (OTC) derivatives contracts.

January 17, 2019 WebPage Regulatory News
News

BoE Publishes the Schedule for Statistical Reporting for 2019

BoE published the updated schedule for statistical reporting for 2019. The reporting institutions use the online statistical data application (OSCA) to submit statistical data to BoE.

January 16, 2019 WebPage Regulatory News
News

PRA Delays Final Direction on Reporting of Private Securitizations

PRA and FCA have delayed the issuance of final direction, including the final template, on reporting of private securitizations, from January 15, 2019 to the end of January 2019.

January 15, 2019 WebPage Regulatory News
News

SNB Updates Forms on Supervisory Reporting for Banks

SNB published Version 1.7 of reporting forms (AUR_U, AUR_UEA, AUR_UES, AURH_U, AUR_K, AUR_KEA, and AURH_K) and the related documentation for supervisory reporting on an individual and consolidated basis.

January 15, 2019 WebPage Regulatory News
News

BCBS Finalizes Market Risk Capital Framework and Work Program for 2019

BCBS published the final framework for market risk capital requirements and its work program for 2019. Also published was an explanatory note to provide a non-technical description of the overall market risk framework, the changes that have been incorporated into in this version of the framework and impact of the framework.

January 14, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: First Update for January 2019

EBA published answers to 13 questions under the Single Rulebook question and answer (Q&A) updates for this week.

January 11, 2019 WebPage Regulatory News
News

PRA Proposes to Amend Supervisory Statement on Credit Risk Mitigation

PRA published the consultation paper CP1/19 that is proposing changes to the supervisory statement (SS17/13) on credit risk mitigation.

January 10, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2473