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With each new IFRS standard, implementation costs typically vary from entity to entity depending on their jurisdiction and existing risk management and insurance accounting practices. For IFRS 17, this variability is even more pronounced because the wide range of existing insurance accounting practices used by entities in the application of IFRS 4 results in different levels of change in the recognition of insurance contracts between entities. An explicit, undistorted, probability-weighted estimate (i.e., the expected value) of the present value of future cash outflows minus the present value of future cash inflows that will occur if the entity performs insurance contracts, including a risk adjustment for non-financial risks. An entity shall disclose in the income statement the profit and loss of groups of insurance contracts issued and the insurance service charges of a group of insurance contracts that it issues, including accrued claims and other insurance service expenses incurred. In the case of income and insurance service charges, all components of the investment must be excluded. An entity cannot report premiums in the result if this information does not correspond to the declared income. [IFRS 17:83-85] If a company expects significant differences in the FCF at the beginning of the group in the period prior to the occurrence of a claim, these contracts are not allowed to apply the PAA. [IFRS 17:54] Each portfolio of insurance contracts is divided into a minimum of: [IFRS 17:16] IFRS 17 requires entities to identify portfolios of insurance contracts that include contracts that are subject to similar risks and that are jointly managed. Contracts within a product line would be expected to present similar risks and therefore be in the same portfolio when managed jointly. [IFRS 17:14] If the contracts in a portfolio belong to different groups only because laws or regulations explicitly restrict the company`s ability to set a different price or level of benefits for policyholders with different characteristics, the entity may include those contracts in the same group. [IFRS 17:20] IFRS 17 is the first comprehensive and truly international IFRS standard that defines the accounting of insurance contracts by an entity. It replaces IFRS 4 – an interim standard.

IFRS 4 does not require the valuation of insurance contracts and instead allows companies to use local accounting standards (national accounts fees) or variations in these requirements for the valuation of their issued insurance contracts. In May 2017, the Board completed its project on insurance contracts with the publication of IFRS 17 Insurance Contracts. IFRS 17 replaces IFRS 4 and sets out the principles for the recognition, measurement, presentation and disclosure of insurance contracts under IFRS 17. An insurance contract is cumbersome when it is initially recognised if the sum of the FCF, all previously recognised acquisition cash flows and all cash flows resulting from the contract at that time is a net outflow. An entity must recognise a loss in the income statement for the net outflow, resulting in a carrying amount of the group`s liabilities to the group`s FCF and CSM at zero. [IFRS 17:47] A contract in which one party (the issuer) accepts a significant insurance risk from another party (the policyholder) by agreeing to indemnify the policyholder if a particular uncertain future event (the insured event) affects the policyholder. The adjustment of risk for non-financial risk is considered to represent the transfer of risk from the reinsurance policyholder to the reinsurer. [IFRS 17:64] An insurance contract may contain one or more elements that would fall within the scope of another standard if they were separate contracts. For example, an insurance contract may contain an investment component or a service component (or both). [IFRS 17:10] Income or expenses from reinsurance contracts held shall be reported separately from expenses or income from insurance contracts concluded.

[IFRS 17:82] The MSC represents the unrealized profit of the group of insurance contracts that the company will seize in the provision of services in the future. This is measured at the initial recognition of a group of insurance contracts at an amount that, unless the group of contracts is onerous, does not result in any income or expense resulting from: [IFRS 17:38] According to the general model, disaggregation means presenting in the income statement an amount that is offset by a systematic allocation of the total income or expense expected from insurance financing over time. of the contract group. When the groups are derecognised, the amounts remaining in the BEC are reclassified in the income statement. [IFRS 17:88, 91a] On the basis of a common sectoral classification, four main categories of insurance undertakings can be distinguished: at the time of initial recognition, the CSM is determined in the same way as the direct insurance contracts awarded, except that the MSC represents the net result of the purchase of reinsurance. On initial recognition, this net gain or loss is carried forward unless the net loss relates to events that occurred prior to the purchase of a reinsurance contract (in which case it is immediately recognised as an expense). [IFRS 17:65] An undertaking shall not be allowed to include contracts awarded more than one year apart in the same group. [IFRS 17:22] Explanation of the new accounting standard for insurance contracts Insurance contracts combine the characteristics of a financial instrument and a service contract. In addition, many insurance contracts generate cash flow with significant variability over a long period of time.

To provide useful information on these characteristics, IFRS 17: In the subsequent valuation of the carrying amount of a group of insurance contracts at the end of each reporting period, the sum of the following factors will be as follows: [IFRS 17:40] An entity must include all future cash flows within the limits of each group contract. The company can estimate future cash flows at a higher level of aggregation and then allocate the resulting execution cash flows to groups of individual contracts. [IFRS 17:33] The remuneration required by an entity must take into account uncertainty about the amount and timing of cash flows arising from non-financial risk when performing insurance contracts. Using the fair value approach, an entity determines the MSC at the transition date as the difference between the fair value of a group of insurance contracts at that time and the FCF measured at that time. With this approach, there is no need for annual groups during the transition. [IFRS 17:C21, C24] Mainly to facilitate the comparison of the conclusion between insurance companies and industries. Although this is a big change for insurance companies, as data management, financial presentation and actuarial calculations need to change! This site will help you understand the different topics. .