UKEB are assessing IFRS 17 Insurance Contracts for adoption in the UK under its endorsement criteria implemented on exiting the EU. While insurance companies desperately need accounting standards to stop them flattering their accounts, UKSA and ShareSoc are not convinced that IFRS 17 meets UKEB’s endorsement criteria. The UKSA/ShareSoc response can be found here.
Financial statements of insurance groups and companies are difficult to penetrate, not least because there have never been any accounting standards for them. For this reason, the IASB has issued IFRS 17 after more than a decade of developing it and because the insurance industry has pushed back on its development (some would say because it wants its accounts to remain opaque to shareholders). The only remaining obstacle in the UK to the adoption of IFRS 17 for UK insurance groups and companies is UKEB’s endorsement.
We have commented on their assessment of whether IFRS 17 meets its endorsement criteria. We have concerns that the endorsement criteria assessment process, for a complex accounting standard such as this one on insurance contracts, is not as objective and bias free as it could be. We also have problems with the standard’s objective and principles of profit recognition being clear and with the potential discount rates that may be chosen for valuing long term insurance liabilities in balance sheets not being prudent enough. Therefore, we do not agree with UKEB that IFRS 17 meets its endorsement criteria of understandability, relevance, reliability and comparability.
