IASB Confirms One-year Delay for IFRS 17
The International Accounting Standards Board (IASB) has proposed to extend the effective date for IFRS 17 Insurance Contracts by one year.
IASB is also planning to extend the temporary exemption available for insurers to apply from IFRS 9, financial instruments standard, so that both the standards namely IFRS 17 and IFRS 9 can be applied at the same time.
The decision has been taken in light of the feedback received from insurers and other stakeholders regarding the application of the new insurance standard. IASB chairman, Hans Hoogervorst, has confirmed that a group consisting of nine insurance organisations wrote to him, expressing serious operational constraints on insurers’ part in meeting the planned January 1, 2021 standard implementation date.
In addition to the standard implementation date, the group also expressed their concerns such as the method to be used for measuring discount rates, and called for improvements in the insurance standard before its practical application.
IASB has said that the decision of delaying the IFRS 17 implementation date by one year reflects the acknowledgement by the board of the uncertainty surrounding the practical implications of the new insurance standard. One of the major reasons as to why the implementation of the standard has been delayed by one year is the feedback received from stakeholders which clearly indicated that more time was required by the insurance companies to meet the requirements of the new insurance standard. By making this decision, IASB has provided a clear direction, which will help all the stakeholders with their planning to align their operations and activities with the requirements of the new standard.
The proposed one-year extension is subject to public consultation, which is likely to take place next year. IASB has said that it expects to discuss the potential amendments to the insurance standard during its meeting that will be held in December.
IFRS17 leader at PwC, Alex Bertolotti, has said that the annoucement of a one year extension would be welcomed by many stakeholders as most of them had concerns regarding meeting requirements of the new insurance standard by January 1, 2021 the original date of implementation of the new standard. The proposed delay will help in releasing some pressure as well as risk from existing plans. However, there is still a lot to be done on the part of the insurance companies with regards to being ready when the time comes to implement IFRS 17.He further said that some of the insurers had been lobbying for this extension for a while as the initial time period was thought to be extremely tight while other insurers were requesting the board to clarify some aspects of the new insurance standard as they felt it would have been difficult or costly to say the least to adopt the new insurance standard without clear direction and understanding about the insurance standard. However, Bertolotti has cautioned that the full impact of the one year extension can only be assessed in light of the review of potential changes that will be made to the insurance standard in the IASB meeting that will be held in December.