New insurance standard issued
On 18 May 2017, the International Accounting Standards Board (IASB) issued a new accounting standard for insurance contracts. IFRS 17 Insurance Contracts (to be issued as AASB 17 in Australia).
The IASB said in its media release on IFRS 17:
‘This first truly international IFRS Standard for insurance contracts will help investors and others better understand insurers’ risk exposure, profitability and financial position.’
IFRS 4 Insurance Contracts (AASB 4) currently allows companies to carry on accounting for insurance contracts using local accounting standards, which means that different countries have used different approaches to account for similar types of insurance contracts, hindering the ability of investors to compare the financial performance of otherwise similar companies.
IFRS 17 will replace IFRS 4 and requires all insurance contracts to be accounted for in a consistent manner, making financial statements more comparable for users.
Insurance obligations will be accounted for using current values, instead of historical cost.
IFRS 17 will apply to annual reporting periods beginning on or after 1 January 2021.
IFRS 17 is not freely available on the IASB web site without a subscription but will be made freely available on the Australian Accounting Standards Board’s web site when it is issued as a standard in Australia.