IFRS 17 and AASB 17

AASB 17 is a new accounting standard for insurance contracts.  It is based on, and almost identical to the international standard, IFRS 17, issued by the International Accounting Standards Board (IASB).

It becomes effective for accounting periods starting 1 January 2021 (proposed to change to 1 January 2022 – see below) or later, though it may be adopted early.

The new standard is quite different in many detailed ways from the current accounting standards for life insurance, general insurance and health insurance in Australia. The standard is complex and there are many challenges to fully understand its implications and to be able to provide definitive guidance.

Information Note (IN)

In late 2016, the Actuaries Institute formed a Task Force to help the profession prepare for the new standard. The Task Force decided to produce an Information Note (IN) as its primary piece of work.

The Task Force completed Version 1.0, a draft for discussion, in March 2018, followed by Versions 1.1 (in July 2018) and 1.2 (in December 2018). In February 2019, Addendum A to Version 1.2 was published.  This dealt with changes to IFRS 17 tentatively agreed by the IASB in January and February 2019. This is now redundant.

Amendments to IFRS 17

After the Addendum to Version 1.2 was produced, the IASB Board met on 14 March, 9 April and 15 May 2019 to consider possible amendments to IFRS 17 Insurance Contracts relating to outstanding matters.  Details of the outcomes from these meetings can be found here.

On 26 June 2019, the IASB released an exposure draft (ED) dealing with the proposed changes to the Standard. The changes in the ED are largely in-line with the tentative decisions made by the IASB earlier in the year.

A marked-up version of IFRS 17 showing the ED changes is here.

The Basis for Conclusions for the ED is here.

IN Version 2.0

Version 2.0 of the IN has now been released (November 2019). The main changes from version 1.2 deal with the ED. Various editorial changes have been made also.

Here is Version 2.0 of the IN.

Here is a copy of Version 2.0 showing the more substantive changes from Version 1.2

For reference, here is Version 1.2 of the IN and here is Version 1.1 of the IN.

The Task Force intends to update the IN again, once the changes to the standard are finalised. Other minor updates may be made as considered necessary as accounting interpretations are clarified and members gain more experience with the standard.

The International Actuarial Association is preparing an International Actuarial Note (IAN) and it some time ago released an exposure draft and is seeking comment – see here.  Members of the Australian TF have contributed significantly to the development of the IAN. Where appropriate the IN will be adapted in future to be consistent with the IAN.

FEEDBACK

The Task Force is keen to be given feedback from members as they put the IN to use.  To help with this, please use this form and get in touch with Linda Vogel who will engage the TF as required.

task force members (AS AT November 2019)

  • Brett Pickett (Taskforce Chair, Discount rates, risk adjustment, LIWMPC representative and AALC)
  • Francis Beens (Insurance Council of Australia (ICA) and General Insurance Practice Committee Representative)
  • David Chan (APRA Representative)
  • Antony Claughton (Health Practice Committee (HPC) representative)
  • Ben Coulter (New Zealand Society of Actuaries)
  • Brendan Counsell (Premium Allocation Approach (PAA), International Actuarial Association (IAA) and the Accounting & Actuaries Liaison Committee AALC)
  • Briallen Cummings (Disclosures / OCI, reporting, current estimates and strategic transition)
  • Anne Driver (AALC, Australian Accounting Standards Board (AASB) TRG)
  • Trang Duncanson (Analyst Community, Financial Services Council (FSC), Actuaries Institute Communication Lead)
  • Jun Oh (APRA)
  • Grant Robinson (Core Requirements)
  • David Rush (Variable Fee Approach (VFA), Australian Securities and Investments Commission (ASIC))
  • Andrew Scott (Actuarial Consultancy)
  • Alison Nanson (Life Risk Adjustment Working Group)
  • Kaise Stephan
  • Victoria Tidmas

WORKING WITH APRA

The Task Force has set up working groups to consider specific issues of relevance to APRA.  These working groups have representation from both APRA and the Task Force.  The first of the working groups are operational; one is addressing the Variable Fee Approach (VFA) and another is considering reinsurance.

As noted in the IN, AASB 17 is an accounting standard. The APRA working groups therefore cannot make decisions about the interpretation of AASB 17 but are considering issues that emerge for APRA from the adoption of AASB 17.  As an accounting standard, AASB 17 is a legal instrument that is enforceable by ASIC.

REFERENCES

There is a list of useful documents and other references in Section 13 of the Information Note (page 202).