By Anthony Appleton, the Director of Accounting and Reporting at
the Financial Reporting Council.
Ahead of the IFRS 17 Forum, Anthony has provided us with an insight into institutional preparedness.
Anthony, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?
I’m a Chartered Accountant, having worked in a number of auditing firms’ accounting technical departments and as a lecturer before joining the FRC in 2014. I lead our work in developing UK accounting standards, including FRS 103 on insurance contracts, developing guidance for company narrative reporting, particular in the Strategic report, and influencing the development of new International Financial Reporting Standards (IFRS) and supporting the process of assessment in advance of their endorsement for use in Europe.
Two areas of particular focus currently are the European endorsement of IFRS 17, the new insurance contracts accounting standard, and developing ideas for the endorsement of IFRS in the UK after its exit from the European Union.
At the IFRS 17 Forum, you will be speaking on your insight regarding – IFRS 17 timelines and institutional preparedness. Why do you believe this is a key talking point in the industry right now and what can risk professionals gain from this insight?
IFRS does not currently include a comprehensive standard for accounting for insurance contracts. Insurance companies from around the world apply a range of different approaches when accounting for such contracts, with international groups often applying different approaches for different parts of their business within the same group accounts.
IFRS 17 introduces, for the first time, consistency across jurisdictions applying IFRS and requires consistency in the accounting for all insurance activities within the same group. Whilst the impact will vary from company to company, depending on its starting point, the move to a consistent accounting approach will in all cases require significant investment in information and accounting systems and require coordinated input from accountants, actuaries, other insurance professionals and IT specialists.
IFRS 17 will provide new insights into the activities of insurance companies as it will require the disaggregation for accounting purposes of insurance contract portfolios in ways not previously seen.
What, in your opinion does the future hold for insurance companies, and how can they ensure they are prepared for full implementation?
Internationally, IFRS 17 has an effective date of years commencing on or after 1 January 2021. However, its use in Europe has not yet been endorsed and it is unlikely that a final decision on its endorsement will be made before 2019.
The endorsement process will be informed by considerations of its impact on the industry and the economy at large. Such considerations require deep analysis of the standard and modelling of its impacts on the financial statements of insurance companies and, in turn, the insurance industry and markets. This can only be done with the cooperation of insurance companies in field testing that will be performed during 2018.
Involvement is such work will also provide the foundations for the system implementation work that will be required should IFRS be endorsed for use in Europe and the UK. For large insurance companies with listings on non-European equity markets, which often require the use of IFRS as issued irrespective of endorsement decisions in Europe, it will also support their move to IFRS for the filing of accounts with those markets.[/vc_column_text]