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The International Accounting Standards Board (IASB) issued a standard for insurance contracts Thursday to help investors and others better understand insurers’ risks exposure, profitability, and financial position.
IFRS 17, Insurance Contracts, replaces IFRS 4, which was implemented in 2004 as an interim standard intended to limit changes to existing insurance accounting practices.
The changes were deemed necessary because the interim standard allowed insurers to use different accounting policies to measure similar insurance contracts written in different countries.
This led to many different approaches that made it difficult for investors to compare and contrast the financial performance of otherwise similar companies, according to a news release.
The new standard creates one model for all insurance contracts in all IFRS jurisdictions, aiming to provide transparent reporting about a company’s financial position and risk.
Read the Journal of Accountancy story here.