The Insurance Commission has pointed out that insurance players are not being prevented from adopting the International Financial Reporting Standard (IFRS) 17 ahead of the IC-deferred implementation schedule of 2023.
A statement issued on Monday quoted Insurance Commissioner Dennis B. Funa as saying that local insurers who are “willing and ready to comply with IFRS 17 before the deferred effectivity date are not precluded to implement the same.”
“In fact, based on the issue papers submitted to the IC, there are insurance companies set to implement IFRS 17 due to the requirement of their respective parent companies,” Funa added.
He said that preneed companies, health-maintenance organizations and mutual benefit associations shall maintain compliance with the current accounting standards until further required by the IC to comply with IFRS 17.
Earlier the IC announced it is deferring the effective date for IFRS 17—which affects insurance contracts or policies—for life and nonlife insurance companies in the country to January 1, 2023 from the original January 1, 2021. The IC also granted an additional one-year period from the date of effectivity proposed by the International Accounting Standards Board (IASB).
According to the IC, the implementation of IFRS 17 was marked with challenges, such as tight timeline, determination of model, lack of clarity, resources and expertise, tight budget, report and disclosure, and lack of information technology infrastructure.
Funa cited that other countries have varying implementing periods for IFRS 17 in their jurisdiction. He also noted that countries, such as China, Hong Kong, Japan, Macau, Taiwan and the United Arab Emirates are still assessing the feasibility of implementing the IFRS 17.
“In the case of India, they will have an early adoption of IFRS beginning either year 2020 or 2021,” Funa said. “Malaysia, on the other hand, will adopt it on 2021 but subject to the development of IASB. In fact, only Thailand intends to comply with IFRS 17 based on the deferred date proposed by the IASB.”
The IFRS is a set of accounting standards that are recognized by at least 166 countries, including the Philippines, and provides a guide on how particular types of transactions and other events should be reported in the financial statements.
The new system supersedes IFRS 4 Insurance Contracts, which establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued.
The IFRS 4 “has caused problems, particularly for investors and analysts in comparing and understanding insurance contracts across jurisdictions,” the IASB said in its document titled “The forthcoming IFRS insurance contracts standard.” “Limited information in the financial statements can lead, in turn, to narrow investments, ambiguity in reporting and ultimately defective decision-making.”
According to the IASB, the “forthcoming insurance contracts standard will require all companies that issue insurance contracts to account for all insurance contracts in a way that provides current estimates at each reporting date of the obligation created by the insurance contracts, reflecting up-to-date information about cash flows arising from insurance contracts, and the timing and risk associated with those cash flows.”
The IASB added that the new standard is also expected to provide “information about the sources of profit or losses through underwriting activity and investing premiums from customers and the extent, and nature of risks arising from insurance contracts.”