Filers Take Note: IASB Shifts IFRS 17 Effective Date

ifrs 17 update
21 November 2018

While 2021 may seem like a long way away, insurance companies across Europe are already laser-focused on one key date: 1 Jan 2021.

As the effective compliance date for the IFRS 17 standard, 1 Jan 2021 has been marked on financial professionals' calendars since the standard was finalised in May 2017.

Still, the 2021 deadline may have been too prompt. At the International Accounting Standards Board (IASB) meeting in London, key decision-makers recommended to move the effective date back one year to 1 Jan 2022.

The proposed deferral is subject to public consultation, which is expected next year. The board plans to discuss the merits of potential amendments to IFRS 17 during its December meeting. 

With one additional year to account for the shift to IFRS 17, financial professionals in insurance companies across Europe now have more time to respond to implementation.

Why the IFRS 17 date was moved

During its October 2018 meeting, the IASB noted it would consider any concerns and implementation challenges at a future meeting. At that time, the IASB would discuss amending the requirements of IFRS 17 beyond the annual improvements the board had already tentatively proposed.

This consideration came to fruition at the November 2018 meeting, where the shift was formally proposed and accepted.

The board generally allows at least 12 to 18 months between the publication of a new standard and its mandatory effective date. However, in the case of major standards that have a pervasive effect on entities, such as IFRS 17, the board has allowed longer implementation periods to help resolve any operational challenges in implementing those standards.

At the same time, the board needs to balance the advantage of a longer implementation period for preparers against the disadvantages of allowing inferior accounting practices, arising from IFRS 4, to continue.

Ramifications of the IFRS 17 date change

Now that the mandatory effective date of IFRS 17 has been moved back one year, some stakeholders are concerned about the workload pushed on preparers and users of financial statements.

With the effective date change, they will experience two sets of major accounting changes (IFRS 17 and IFRS 9) in a short period of time. Still, this impact is surmountable, according to IASB stakeholders.

As a recent IDC report details, focusing on the technology teams use and moving financial reporting to the cloud can help companies stay agile despite a changing regulatory landscape—and despite deadlines of accounting changes.

Final takeaways

While the IFRS 17 mandatory date change may seem momentous, it is not unheard of, as the IASB has opted to implement a similar shift in years past.

The IASB published the Exposure Draft Effective Date of IFRS 15 in May 2015, proposing to defer the effective date of IFRS 15 by one year. The IASB concluded that the move would be sufficient in terms of providing additional time to implement IFRS 15.

Accordingly, financial professionals working for insurance companies across Europe should be assured that the IFRS 17 effective date change is for the best and will result in the most thorough end result for the entire industry.

For more information on how teams can assure swift, effective IFRS 17 compliance, visit the Workiva IFRS 17 solution page.