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.
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.
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.
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.
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:
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