International Financial Reporting Standards (IFRS) specialist and consultant, Dale Brown says with the upcoming IFRS 17, effective January 1, 2022, insurance companies will have to fundamentally change the way they manage their insurance contracts.

The IFRS provides a common global language for business affairs, so that company accounts are understandable and comparable across international boundaries. IFRS was developed by the International Accounting Standards Board (IASB), an independent, non-profit organisation.

Brown in an interview with the Jamaica Observer indicated that while IFRS 17 insurance contracts was first published in 2017 and initially set to come in effect on January 1, 2021, that date was deferred for a year and will come into effect in 2022.

“The objective of IFRS 17 is to provide a common, high-quality standard that addresses recognition, measurement, presentation and disclosure requirements for insurance contracts,” Brown told Sunday Finance.

“Some of the requirements of IFRS 17 are such that companies will need to start to gather information in a different manner than they may have done in the past, [which will] require different processes, procedures and controls,” he continued.

Brown added that IFRS 17 will replace the current insurance contracts model IFRS 4.

IFRS 17 combines current measurement of a company’s future cash flows, with the recognition of profit over the period that services are provided under the contract.It also presents insurance service results — including presentation of insurance revenue — separately from insurance finance income or expenses, and requires an entity to make an accounting policy choice of whether to recognise all insurance finance income or expenses in profit or loss, or to recognise some of that income or expenses in other comprehensive income.

IFRS 17 includes an optional simplified measurement approach, or premium allocation approach, for simpler insurance contracts.

Brown added that it is in companies’ best interest to adopt new standards implemented so as to be in full compliance with the IFRS mandated by the IASB.

In furtherance of the new insurance contacts standard, Dale Brown and IFRS specialist Chris Brundrett presented at the KPMG in Jamaica Annual IFRS Update Seminar on Wednesday (September 18) at the AC Hotel Kingston.

The presentations featured a series of refresher questions and case studies, materially around participants from both private and public sector organisations’ collective experience with IFRS 9 (financial instruments) and IFRS 15 (revenue recognition) — which were both adopted in 2018 —IFRS amendments, standards effective in 2019, and standards effective in 2020 and beyond.

According to KPMG in Jamaica’s managing partner R Tarun Handa, KPMG, as one of the leading professional services firms in Jamaica, sees its role in the business community as not just service providers but as educators, including educating auditing and accounting professionals to keep abreast of new International Financial Reporting Standards and other current issues.

KPMG in Jamaica is a member firm of KPMG International, and together with its predecessor partnerships, has been present in Jamaica for more than 100 years. KPMG in Jamaica has two full-service offices in Kingston and Montego Bay. Globally, KPMG operates in 154 countries and territories serving businesses — governments, public sector agencies and not-for-profits through audit and assurance practices and the capital markets.