IFRS 17 is an international accounting standard for insurance contracts issued in 2017 by the International Accounting Standard Board. The objectives of the standard are to standardize insurance accounting globally, to improve comparability and increase transparence, and to provide users of accounts with needed information to understand the insurer’s financial position, performance, and risk exposure. The implementation date of the stand-ard is January 2023 but has been postponed several times, due to the complexity of the standard as well as critics from stakeholders.
IFRS 17 will be replacing IFRS 4 which is an interim standard issued in 2004. The standard is problematic because of lacking guidelines for recognition of insurance contracts. As a result, firms must use local legislation for recognition of insurance contracts. This results in different accounting policies amongst firms around the world, subject to the international accounting standards. Danish insurance contracts are therefore using
“Regnskabsbekendtgørelsen” for recognition of insurance contracts, even though they are subject to IFRS-standards. This is causing some challenges regarding lack of transparency in the financial statements, as well as lack of comparability across countries.
This paper examines why there is a need for a new international accounting standard, and how IFRS 17 will influence recognition and measurement of insurance contracts for the Danish non-life insurance companies, who are subject to the international accounting standards. It is also assessed if the standard will achieve the goal of increasing transparency and comparability amongst companies issuing insurance contracts.
The issues mentioned above will be assessed in this thesis based on an examination of the theories for IFRS 17 and current practice, respectively. A theoretical comparative analysis will be conducted based on this theory. This analysis will line up IFRS 17 and
“Regnskabsbekendtgørelsen” against each other to derive similarities and differences and understand the effects of the new standard for the Danish non-life insurance industry.
The thesis concludes that the implementation of IFRS 17 will indeed raise the comparability of financial statements across counties, compared to current practice by IFRS 4. The financial statements will not be completely comparable due to IFRS 17 being based on principles. This results in some estimates like the discount rate and non-financial risk adjustment being conducted individually by the companies. Transparency will also increase be-cause of the level of aggregation required in IFRS 17, making it impossible for companies to set off onerous contracts with profitable contracts.
|Uddannelser||Cand.merc.aud Regnskab og Revision, (Kandidatuddannelse) Afsluttende afhandling|