The International Accounting Standards Board’s (IASB) Exposure Draft, “Amendments to IFRS 17” was issued in June 2019. This Exposure Draft proposed amendments to IFRS 17 Insurance Contracts to respond to concerns and challenges raised by stakeholders as this new standard is being implemented.
The AcSB’s due process includes ensuring that Canadian entities’ financial reporting needs are considered by the IASB.
On September 25, 2019, we issued our response letter to the IASB’s Exposure Draft. Our letter encourages the IASB to move quickly to finalize IFRS 17, as the standard is expected to benefit the global capital markets.
In our view, a common global adoption date of IFRS 17 is critical to the success of transition by supporting the move to greater global comparability. We support the proposal to defer the effective date of IFRS 17 by one year but emphasize the urgency to finalize the standard given its importance to financial statement users globally.
While we support deferring the effective date, we suggest that the IASB remove the requirement for restating comparatives. As a standard setter, the AcSB recognizes the importance of restated comparatives to help users understand the effects on an entity’s financial statements of transitioning to a new standard. However, we are concerned that requiring comparatives to be restated under IFRS 17 but not for IFRS 9 Financial Instruments will not provide relevant information to users.
For IFRS 9, the IASB considered various factors in reaching its decision not to require restated comparatives. However, in our view, an insurance entity’s asset management strategy is closely linked to its insurance business. Without restated comparatives under both standards, the comparative figures are not indicative of future trends to help investors and analysts predict future cash flows, and there is a risk they could be misleading to users less familiar with the industry. As a result, we are concerned that the restated comparatives under IFRS 17 are not of value to users.
In addition, systems readiness continues to be a significant concern in Canada. Therefore, we believe making it optional to restate comparatives under IFRS 17 would:
- address the concern about lack of quality comparatives;
- alleviate the tension created by some of the systems-related concerns; and
- result in higher quality implementation.
Overall, we broadly support the proposals and provide suggestions on certain proposals that we think will help to achieve the IASB’s objective and/or reduce operational complexity.
Read our letter to understand the matters we raised to the IASB for further consideration.
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Davina Tam, CPA, CA
Principal, Accounting Standards Board
Phone no.: +1 (416) 204-3514