The adoption of IFRS 17 in mid-2017 means that the long road to a standard for the accounting of insurance contracts has come to an end and the go-ahead has been given for the implementation of this standard for insurance companies. Even though the IASB postponed the date of first-time application by one year for detailed revisions of the standard, a large number of technical questions remain open with regard to the interpretation of the requirements of IFRS 17.
Integration of IFRS 17 into the Existing Finance Architecture
The requirements under IFRS 17 raise not only questions of technical interpretation, but also ones relating to how the requirements for reporting insurance contracts are to be integrated into the existing finance architecture, what new components have to be acquired or developed and what effects they will have on the processes for preparing financial statements and for ongoing reporting. Particularly in international insurance groups, there is a question not only of a uniform interpretation and application of the regulations throughout the Group, but also whether and to what extent IT solutions and processes must/should be standardized. In many cases, IFRS 17 also offers the opportunity to standardize and optimize existing heterogeneous reporting landscapes beyond the original requirements of IFRS 17.
In addition to pure external reporting obligations, insurance companies also face the question of how they can integrate the new external reporting obligations into their internal controlling and what interactions and synergies exist with regard to regulatory requirements. In both cases, as a capital-market-oriented company it is desirable not to separate external reporting from internal controlling. However, it is necessary to avoid causing misallocations due to the guidance of IFRS 17 where such is not adequate for controlling. This complexity is exacerbated by the fact that most insurance companies are introducing IFRS 17 and IFRS 9 parallel to each other and not only have to achieve a balance between the accounting effects, but have to integrate both into controlling.
Who Is Affected by IFRS 17?
It is true that IFRS 17 primarily affects insurance companies – but not exclusively. In principle, all companies that issue insurance contracts within the meaning of IFRS 17 are affected. As things stand at present, this may also include certain guarantees issued by credit institutions, but also certain guarantees in the real economy. At least a review and documentation are necessary here.
FAS AG Support in the Introduction of IFRS 17
FAS AG supports insurance companies and other companies with insurance contracts in the implementation of IFRS 17, both with regard to the technical interpretation and application as well as the design and implementation of the necessary processes and integration of the requirements into the finance architecture. In addition, FAS AG's comprehensive expertise in the area of the IFRS 9 introduction allows an integrated implementation and the development of a harmonized controlling approach for reporting.
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