The International Accounting Standards Board (IASB) has again shifted the effective date for International Financial Reporting Standards (IFRS) 17 insurance contracts to January 1, 2023.
The date was originally set for January 1, 2021 before an amendment in 2019 saw it moved by one-year to January 2022.
Consequently in response to feedback from the amended exposure draft, the IASB has voted to defer the effective date of IFRS 17 (incorporating and amendments) to annual reporting periods beginning on or after January 1, 2023.
Furthermore, the IASB also voted to extend the fixed expiry date of the temporary exemption from applying IFRS 9 in IFRS 4 to annual reporting periods beginning on or after January 1, 2023.
This development is coming barely three weeks after the Federal Government of Nigeria inaugurated the Insurance Industry Financial Reporting Working Group (IIFRWG), an advisory and consultative team it constituted for the purpose of seamless adoption of (IFRS)17 in Nigeria, come January 2022.
Speaking at the inauguration ceremony in Lagos, Acting Commissioner of Insurance, Sunday Thomas, said the working group consists of members with relevant expertise and experience of insurance business, its accounting as well as financial instruments.
According to Thomas, the working group will provide specialised knowledge to enhance an understanding of insurance specific issues and technical assessment of proposals. He added that the group will advise and support the commission and industry on areas like: disscuss technical assessment and interpretations issues arising from IFRS 17 and consider consistent application within the Nigerian insurance industry, identification of interpretation and implementation issues on insurance specific matters and consider implementation questions raised by operators, assist in the preparation and execution of activities that will facilitate the implementation of the adoption of IFRS 17 among others.
“If the effective date of implementation is not shifted again, it therefore means that Nigeria has only one year to prepare for the adoption of IFRS 17. It is against this backdrop that the Commission hereby constitutes a working group that will help to foster the country’s adoption of the IFRS 17 in line with best practice”.
Thus, this news means Nigeria insurers now have two years to effectively prepare for the seamless adoption of the IFRS 17.
In light of the delay by one-year from the date proposed in June 2019 and by two-years from that set out in IFRS 17, industry players have commented stating it is a welcomed news.
According to the global IFRS 17 leader at PwC, Alex Bertolotti, the move from the IASB was welcomed.
“It recognises the practical difficulties for many insurers in implementing the significant changes brought about by IFRS 17. The extra year gives some insurers a chance to consider how to derive more business value from their extensive IFRS17 projects. For others, it will de-risk the delivery timetable.
“The additional time will also be welcome as insurers consider how they can use IFRS 17 to tell a clearer and more understandable story about their company,” said Bertolotti.
For Ralph Ovsec, Senior Director at insurance and reinsurance broker Willis Towers Watson, the extension addresses a number of concerns that have been raised.
“We encourage companies to continue to press forward at current pace and use this additional time to strengthen their processes and procedures as well as allow for more testing, dry runs and contingencies. We also believe a shared effective implementation date for IFRS 17 and IFRS 9 will avoid temporary earnings mismatches that would otherwise exist and reduce implementation costs.
“The current global environment adds significant resource and time constraints to insurers’ operations, and this additional respite will reduce those near-term pressures on insurers,” said Ovsec.
IFRS 17 is an International Financial Reporting Standard that was issued by the IASB in May 2017.