In the circular, the CMA has advised insurance companies to adopt the phases to get ready for the implementation of IFRS 17 in 2021. The new accounting standard will replace IFRS 4, the CMA said.
The CMA has recommended to insurance companies to execute three phases to assimilate IFRS 17 on insurance contracts.
The first phase is to conduct a gap analysis in respect of financial and operational impact of implementation of IFRS 17 instead of IFRS 4. The report on the gap analysis should be submitted to the CMA. This phase will be from September to end of December 2018.
The second phase is related to the design of internal rules and processes to cope with IFRS 17 with regard to accounts, statements and other requirements. This phase will also include developing a detailed plan with timelines for its implementations considering the results of the previous phase. The second phase will be from January to December 2019.
The third phase includes commencement of empirical implementation of IFRS 17 ‘insurance contracts’ and evaluation of the results. The implementation will be parallel with the existing system with evaluation of impact of the implementation. Proposed period of the implementation will be throughout 2020.
The objective of implementation of IFRS 17 is to provide unified standards for accounting of all insurance contracts including reinsurance contracts, allowing comparability for the benefit of investors and insurers, the CMA said. It said the new standard will assist investors, users and analysts understand financial statements and accounting treatment of insurance contracts and the risks insurance companies are exposed to and their impact on the profitability and financial position of such companies.
The CMA further said that the implementation of IFRS 17 will enhance the comparability of financial reports among the companies and financial markets around the world. ‘Such comparison would ease merger and acquisition activities and enhance competition to attract capital investments and boost investors’ confidence.’