What are the Main features of the IFRS standards 10?
- The new IFRS will be more far reaching than the 2005 IFRS and their impact will be felt across many parts of an insurance organization.
- When combined with Solvency II the reform will have a wider scope than accounting and regulation. This is a genuine non-discretionary business transformation and the way in which the requirements are implemented is key to manage the impact on the business
- The new IFRS Insurance include requirements on insurance liabilities (IFRS 4 Phase II), investments and hedging (IFRS 9), asset management revenues (new revenue standard), consolidation of funds (IFRS 10 and 12), treatment of joint ventures (IFRS 11) and leases (new leasing standard).
After IFRS 4 Phase II the adoption of IFRS 9 is the most pervasive reform of financial reporting rules.
- The new standard entirely replaces the current requirements through a three-phased approach:
– classification and measurement
– impairment of financial assets
– hedge accounting.
- To react to the late discovery of off-balance sheet structures during the 2008-09 crisis IFRS 10 and 12 refine the definition of control which will impact the extent insurers consolidate investment funds and special purpose vehicles. This change is the first of the new IFRS Insurance pronouncement to be implemented (from 1/1/13 or 1/1/14 depending on the insurer listing under US market rules or not) expected to lead to some material changes in their reported figures. For example, insurers will need to consolidate entities which were not previously considered part of the group.