INSURANCE COMPANIES OPERATING in Barbados will face major changes in the requirements for contract accounting.
Professional services firm PricewaterhouseCoopers (PwC) announced that insurers will need to apply International Financial Reporting Standards (IFRS) 17 for annual periods beginning on or after January 1, 2021.
PwC said IFRS 17 “will fundamentally change the accounting for all entities that issue insurance contracts and investment contracts with discretionary participation features”.
Last week, the International Accounting Standards Board (IASB) announced its long-standing project on insurance accounting and published IFRS 17.
PwC insurance leader, Barbados, Bruce McClean, explained: “Insurance reporting is being redefined in one of the single-largest standard reforms in decades. Additionally, it will begin to mark a divergence between insurers, and indeed some banks, reporting under IFRS.
“Profit recognition for both life and general insurers is set to change under the new standard. In fact, this new global standard will be an unprecedented change to the current insurance accounting practices, fundamentally changing how and what insurance companies have to report,” he added.
Arthur Wightman, regional insurance leader for PwC in the Caribbean, said IFRS 17 had “taken many years to come to fruition and similarly it will require careful planning and implementation for those companies impacted”.
He noted: “The IASB’s aim is to provide more transparency and comparability than the current accounting standards. It is, however, complex and the detail of the standard together with the forthcoming guidance over implementation will play a significant role in the ease or otherwise of adoption of the standard.”
Alex Bertolotti, PwC global IFRS insurance leader at PwC, also commented on the change. He said it was clear, especially for life insurers that “whilst ultimate profits will not change, the emergence of those profits can change significantly”.
“Both insurers and their analysts will need to assess the full impact in terms of telling the performance story of their companies. Key performance indicators and income statements will look significantly different following implementation,” he said.
“There are things firms should be doing now to understand and communicate the impact of different assumptions and approaches, as well as to assess the scale of work and resources required.”
Bertolotti added: “Systems and processes will likely change significantly to accommodate the granularity of data needed to comply. We have already noticed a trend of companies taking the opportunity to revamp and update legacy systems, as part of wider transformation projects, to get a bigger return for their investment.” (SC/PR)