Insurance – Implementing IFRS 15

Insurance – Implementing IFRS 15

We look at possible impacts of IFRS 15, actions that may be needed, and how KPMG can help.

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IFRS 15 (new revenue standard) for insurance flyer image: child pushing battered wooden toy car

Use this document to help you think through the impacts for your business.

Insurers should not underestimate the potential impact of the new revenue standard that's effective from 1 January 2018.

We look at how IFRS 15 Revenue from Contracts with Customers will affect insurers, and how KPMG can help.

Several types of arrangement could be affected

Although the new revenue standard does not apply to insurance contracts, it may apply to other arrangements – such as asset management, insurance broking, pension administration, claims handling or custody services.

Assessing the impact of the new revenue standard will require both an understanding of the new revenue recognition model and an analysis of how the new model applies to particular transactions that fall in the scope of the new standard. 

What is in and out of scope?

Insurance contracts, along with contractual rights or obligations in the scope of the financial instruments guidance, are fully or partly scoped out of the new revenue standard. This is largely consistent with current practice.

However, non-insurance service contracts may fall entirely in the scope of the new standard.

Contracts that are partly in the scope of another standard are first subject to the requirements of the other standard, if that standard specifies how to separate and/or initially measure one or more parts of the project.

Effective date and next steps

It may not be straightforward to develop an implementation plan that addresses IFRS 15 as well as the requirements of IFRS 9 Financial Instruments, IFRS 16 Leases and the forthcoming insurance contracts standard. Insurers will benefit if they develop an overall strategy for transition that incorporates all accounting changes expected in the near future and capitalises on any available synergies.

How could your business be affected?

Read Accounting for revenue is changing: Impact on insurance companies for more information on how IFRS 15 will affect insurers, and how KPMG can help.

The new revenue standard will impact:

  • contracts that fall entirely, or partly, in the scope of the new revenue standard;
  • unbundling of performance obligations to provide goods or non-insurance services from insurance contracts;
  • timing of revenue recognition for up-front fees;
  • deferral and amortisation of costs for non-insurance contracts or components; and
  • measurement and timing of recognition for variable consideration.  

Visit our IFRS – Revenue and IFRS – Insurance hot topics pages for KPMG’s most recent publications on these projects.

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