Accounting for insurance contracts is changing. It’s time to prepare for the impacts on your business.
The new insurance contracts standard – expected within the next few months – will significantly impact insurers. It is much more than an accounting change as it will impact the business as a whole.
Implementing the new requirements will be very complex, so – now that the IASB have concluded their substantive discussions – it’s time to engage. The challenges involved reach beyond accounting and will require significant changes to:
The new insurance contracts standard introduces a new measurement model for insurance liabilities.
It is based on a current measurement approach, rather than a cost measurement approach. As a result, profit or loss and equity may become more volatile.
The model is intended to reduce accounting mismatches. However, they may still arise due to the different accounting bases of the assets and liabilities.
The new standard will affect many other aspects of insurers’ day-to-day activities, and will change the way investors evaluate their performance.
Now is the time to begin assessing how the new accounting requirements will affect your business. You will also need to consider how the new insurance contracts standard will interact with other accounting standards – in particular, the new financial instruments standard, IFRS 9.
A robust assessment phase is critical to laying the foundation for a successful implementation project, and will help build in flexibility.
We can help accelerate the assessment and design phases using our purpose-built tools.
You can also download our publication Accounting for insurance contracts is changing to further understand how you might be affected, and the actions you may need to take. There are two versions of this publication – one for life insurers, and one for general insurers.
They highlight how our cross-functional team of experts can help you with the accounting and operational challenges of the new standard.
Please speak to your usual KPMG contact if you would like to find out more about how KPMG can help your business.
For KPMG’s most recent publications on the forthcoming standard, visit our IFRS – Insurance hot topics page.
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