Petaling Jaya, 10 August 2020 – When the International Accounting Standards Board (IASB) issued amendments to IFRS 17, Insurance Contracts, on 25 June 2020 after a year of deliberations, key among the amendments was a change of the effective date to 1 January 2023. Insurers now have an extra year to implement IFRS 17, or the Malaysia equivalent of MFRS 17, which was originally meant to go in effect from 1 January 2021.
According to KPMG in Malaysia, this deferment is a welcomed reprieve for insurers especially now as companies struggle to confront the challenges COVID-19 has presented to their customers, people and business.
Mok Wan Kong, Head of Insurance at KPMG in Malaysia, said: “Most insurers have already started on their IFRS 17 implementation journey, but the COVID-19 pandemic has changed the dynamics of the business landscape. As a result, many are forced to decide whether to prolong the implementation project timeline to align with the new effective date, or pause and focus instead on building up their business during this pandemic recovery period.”
There are inherent risks attached to either options, cautioned Mok. For those that are well into their IFRS 17 journey, what was already a long‑haul just got longer and prolonging the project timeline will mean that keeping the costs of change under control has become even more of a challenge. On the other hand, pausing the implementation also poses risks to the insurers’ ability to secure the right tools and capabilities at a later stage, which could also translate to higher costs.
Mok advised, “Where possible, we encourage insurers to keep the momentum going and use this extra time wisely. However, should business priorities require the implementation progress be paused, ensure that you have an implementation road map with clearly marked milestones beforehand, so that you have a thorough understanding of the right tools and capabilities you’ll need to achieve all objectives by 2023.”
To move things forward, insurers should focus on five key areas:
Mok added: “Similar to any IFRS conversion that involves significant time to complete, it is crucial to have extensive implementation roadmap and allow for certain flexibility to cater for uncertainties. Companies need to ensure that the commitment and motivation to complete the project remain high. They should take this opportunity of deferment to expand its scope of IFRS 17 financial reporting initiatives, for example to also include scope on management reporting improvements to cater for eventual adoption of IFRS 17.
“Let’s not forget that IFRS 17 marks the biggest single change to insurance accounting, even bigger than the introduction of the IFRS Standards itself. Hence, despite the extra time, we all have to raise our game to hit the new targets” Mok concluded.
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