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IFRS 17 Masterclass:

Comprehensive IFRS 17 Requirements for Successful
Implementation and Transition

DOWNLOAD BROCHURE

Click on the locations below to request for PDF brochures

Dubai, United Arab Emirates  (29-30 Mar)
Kuala Lumpur, Malaysia  (20-21 Apr)

Workshop Overview

IFRS 17 replaces IFRS 4, which currently permits different accounting practices for similar insurance contracts. IFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features. The IASB has tentatively decided to defer the effective date of IFRS 17 to annual periods beginning on or after 1 January 2022.

IASB has invested no less than 20 years of development effort into IFRS 17 to ensure that insurers reflect the effect of economic changes in their financial statements in a timely and transparent way. IFRS 17 ends up-front profit taking and revenue will only be recognised as the service is provided. Insurance liabilities will be calculated as the present value of future insurance cash flows with a provision for risk, where a discount rate will reflect current interest rates. The build-up of unsustainable equity positions will become visible much more quickly. The cost of options and guarantees will be regularly updated and fully reflected in the financial statements. Companies will also provide updated information on the risk margin they hold for their insurance products. The losses embedded in onerous groups of contracts will have to be recognised immediately. Contracts can be grouped, but in a way that ensures that the losses embedded in onerous groups of contracts will not be averaged with groups of profitable contracts. This will bring greater transparency and comparability about the profitability of both new and existing insurance contract business.

Insurers are concerned about the impact of IFRS 17 on their financial statements, processes and systems. The impact on individual insurance entities will be highly variable depending on their previous policies and practice, and the nature of the insurance business they contract, especially whether it is short tailed or life. Consequently, the impacts on the reported numbers and metrics will be varied.

Preparing for and implementing IFRS 17 will be challenging. It will require considerable effort to gain an initial understanding of the impact on the reported numbers as well as the upgrades to process and systems to ensure they can provide IFRS 17 compliant data. This will require, from an early stage, coordination and dialogue between functions such as Actuarial, Finance and IT in executing an IFRS 17 implementation project.

The course provides the working knowledge of the IFRS 17 rules, how the numbers are constructed and presented.

    Key Takeaways
    • Understand the changes in IFRS 17 from the current IFRS 4 Insurance Contracts
    • Appreciate the accounting methodology prescribed in IFRS 17 and evaluate its impact on the financial statements
    • Understand the transition requirements in IFRS 17
    • Analyse the presentation and disclosure requirements in the financial statements
    WHY YOU SHOULD ATTEND
    • Stay up-to-date with latest development in IFRS 17
    • Understand the transitional provisions
    • Detailed practical examples on implementation and application of IFRS 17
    • Real-world challenges in applying IFRS 17, and strategies to overcome them
    • Practical and hands-on workshop
    • Comprehensive materials covering all aspects of IFRS 17
    Methodologies
    • Highly practical approach
    • Cases, examples, open discussions
    • Description and explanation of IFRS 17, including implementation requirements and transitional rules
    • Use of illustrative financial statements and worked examples
    • Participants will need to bring laptops to work through the examples and case studies
    Who Should Attend

    The course is designed for preparers and users of accounts as well as the implementation team members who would like to gain an understanding of the requirements of IFRS 17 and its impact on the financial statements, processes and systems, including:

    • IFRS 17 Implementation team members
    • Finance department staff – Chief Financial Officers, Financial Controllers, Finance Directors, Heads of Financial and Corporate Reporting, Managers, Accountants, Accounting Policy staff
    • Risk department staff – Chief Risk Officers, Risk Managers, Risk Analysts
    • Actuarial department staff
    • Auditors involved in auditing IFRS 17 financial statements
    • Financial analysts, Portfolio Managers, Securities analysts, Pension fund managers, Investment analysts
    • Internal auditors
    • Consultants
    • Legal departments
    • Anyone who requires the knowledge of IFRS 17
    ProgramME Agenda

    Session 1: OVERVIEW

    • Objectives and overview of IFRS 17
    • Key terms and principles
    • Scope and exclusions
    • Financial guarantee contracts
    • Fixed-fee service contracts

    Session 2: SEPARATION OF COMPONENTS

    • Determine whether non-insurance elements require separation
    • Embedded derivatives
    • Investment components
    • Combination of insurance contracts

    Session 3: LEVEL OF AGGREGATION

    • Portfolios identification
    • Grouping contracts at initial recognition according to expected profitability
    • Cohorts

    Session 4: RECOGNITION OF INSURANCE CONTRACTS

    • Criteria and timing of recognition
    • Earliest of:
      • Coverage period
      • Payment from policy holder
      • Group of contracts becomes onerous

    Session 5: MEASUREMENT

    • General model as the core approach
    • Modifications and simplification to the general model in specified circumstances

    Session 6: MEASUREMENT UNDER THE GENERAL MODEL

    • Initial recognition, subsequent measurement and presentation under general model
    • Fulfilment cash flows
      • PV of estimated future cash flows
      • Discount adjustment of time value of money and financial risk
      • Risk adjustment of non-financial risk
    • Contract Service Margin (CSM)
    • Estimates of future cash flows
      • Contract boundary
      • Incorporation of all reasonable and supportable information without undue cost/effort
      • Market variables and non-market variables
      • Explicit cash flows
    • Discount rates
      • Consistent with cash flows characteristics
      • Observable market prices
    • Risk adjustment for non-financial risks
    • Onerous contracts: Initial recognition and subsequent measurement

    Session 7: PREMIUM ALLOCATION APPROACH

    • Permitted if:
      • Liability measurement (i.e., the fulfilment cash flows related to future service plus the CSM) under premium allocation approach would not differ materially from general model
      • Coverage period of each contract in group is one year or less
    • Considerations of facts and circumstances for liability measurement
      • CSM pattern of recognition difference
      • Effect of discount rates changes
    • On initial recognition, liability is measured at:
      • Premiums; minus
      • Insurance acquisition cash flows; plus/minus
      • Amount arising from derecognition of asset/liability, recognised for insurance acquisition cash flows, that the entity paid/received previously
    • Subsequent measurement:
      • Carrying amount at start of reporting period; plus
      • Premiums received; minus
      • Insurance acquisition cash flows; plus
      • Amortisation of insurance acquisition cash flows recognised as expense in the period; plus
      • Adjustment to financing component; minus
      • Insurance revenue recognised; minus
      • Investment component paid/transferred for incurred claims

    Session 8: REINSURANCE CONTRACTS

    • Timing of recognition:
      • At the later of the beginning of the coverage period, or the initial recognition of underlying contract, if reinsurance provides proportionate coverage
      • Otherwise, from the beginning of the coverage period
    • Measurement: Consistent assumptions used to measure the estimates of the PV of future cash flows of both the reinsurance contracts and the underlying insurance contracts
    • CSM can be either a net cost or net gain of purchasing reinsurance for services yet to be received
    • Retroactive reinsurance CSM exception
    • Change in fulfilment cash flows allocated to a group of underlying insurance contracts that are recognised in P&L, is also recognised in P&L
    • Subsequent measurement of reinsurance contracts
    • Premium allocation approach for reinsurance contracts

    Session 9: CONTRACTS WITH PARTICIPATION FEATURES

    • Contracts with direct participation features
      • Variable fee approach measurement
      • Expectation of payments of substantial share of the fair value returns to the policyholder
      • Impact of options and guarantees on the eligibility criteria
      • Subsequent measurement and disclosure requirements
      • Mitigating financial risks with derivatives
    • Mutualisation of contracts; Effect of loss recognition; Release pattern of CSM over the coverage period
    • Investment contracts with discretionary participation features

    Session 10: CONTRACT MODIFICATION AND DERECOGNITION

    • Impact of modifications on financial statements
    • Accounting for derecognition

    Session 11: ACQUISITION OF INSURANCE CONTRACTS

    • Business combinations
    • Portfolio transfers
    • Customer lists and relationships not connected to insurance contracts

    Session 12: PRESENTATION AND DISCLOSURES

    • Statement of financial position; statement of financial performance
    • Insurance revenue
    • Insurance service expense
    • Insurance finance income or expenses
    • Qualitative and quantitative disclosures
    • Explanation of recognised amounts
    • Significant judgements in applying IFRS 17
    • Disclosure about the nature and extent of risks

    Session 13: TRANSITION

    • Full retrospective
    • Alternative transition approaches: Modified retrospective & Fair value approach
    • Disclosure relief on transition
    • Redesignation of financial assets

    Session 14: EXPOSURE DRAFT AMENDMENTS TO IFRS 17 (ISSUED JUNE 2019)

    • Scope exclusion from IFRS 17 Insurance Contracts for some credit card contracts
    • Transition—the prohibition from applying the risk mitigation option retrospectively
    • Business combinations—contracts acquired in their settlement period
    • Interim financial statements and
    • Asset for insurance acquisition cash flows—transition and business combinations