The new insurance contracts accounting standard (IFRS 17) published today by the International Accounting Standards Board (IASB) brings greater comparability for investors and analysts, according to KPMG International.
KPMG International welcomes the publication today of the new, long-awaited accounting standard for insurance contracts. This new, comprehensive accounting model is 20 years in the making and heralds an end to the lack of comparability in the insurance sector.
Due to take effect on 1 January 2021, the new standard is the result of years of discussion, exposure drafts and debate. Although it has long been recognized that current accounting practice did not offer sufficient comparability between the financial positions and performance of insurers in different jurisdictions and with companies in other industries, the complexity of insurance accounting and variety of products meant that agreeing on a new standard was an extremely challenging task.
Feifei Zhang, Partner, Actuarial Services, KPMG China, says: “IFRS 17, without any doubt, will be a huge step towards the convergence of China GAAP to IFRS, following the previous insurance accounting change in 2009. It will raise fundamental challenges not only to the financial reporting, but also to the operating model, product offering and IT infrastructure of each individual insurance company. At the same time, this is an opportunity to create synergy, improve efficiency, and gain competitive advantage in China’s fast-growing and innovative insurance market.”
In terms of impact for insurers in Hong Kong, James Anderson, Partner, KPMG China, comments: “Today’s confirmation of the effective date and final requirements of IFRS 17 will provide certainty to Hong Kong insurers who have been holding off until now to begin analysing the impact of the standard and designing operational solutions”.
Multinational insurers who plan to leverage head office-led projects should expect the momentum of these projects to rapidly increase and will need to make plans locally to keep pace with head office expectations, Anderson added.
“We welcome the new standard and congratulate the IASB on this significant milestone after years of endeavor,” said Gary Reader, KPMG’s Global Head of Insurance and a partner with KPMG in the UK.
“The greater comparability and greater transparency that IFRS 17 provides should be a clear benefit to analysts and users of financial information. For the first time, insurers will be on a level footing internationally. It will open up the ‘black box’ of current insurance accounting. However, these and other potential benefits will only come through the hard work of implementing the new standard, which we expect will raise several challenges for the sector. It will be a tough task for many.” – BusinessNewsAsia.com