Millennium News & Events
Technology Transformation for IFRS 17 Regulatory Compliance
By Brendan Shaw - 11th October 2017
IFRS 17 is the new standard for insurance contract accounting, replacing IFRS 4 and becoming active from January 2021. The standard will be complex with fundamental differences concerning accounting in both liability measurement and profit recognition. The financial and operational implications will require changes to insurers’ accounting practices, providing a significant challenge for much of the industry. For companies affected by the changes, it will likely require changes and modifications to the existing finance and accounting systems used to collect and report financial data.
A finance transformation project conducted in conjunction with an IFRS 17 assessment that effectively maps IFRS-related changes into the finance system can result in efficiencies, which could be significant. Given the lead times for system changes, it is better to understand the capabilities of current systems in meeting the accounting policies, rather than waiting until the finer details of IFRS 17 have been finalised. Tradeoffs will need to be made and companies may have to decide between spending money adapting existing systems or replacing them sooner than intended to get added features or functional capabilities.
There are steps that can be taken now, to help you get your systems ready for an IFRS 17 transformation. Firstly, you need to become familiar with the reporting standards. Not knowing what IFRS 17 entails will make it difficult to continually meet the requirements. Form a project team to examine existing system capabilities and frame the accounting policies that drive information requirements. You need to decide whether to use IFRS 17 as a catalyst for transforming and improving management information systems or whether to make minor changes to existing infrastructures to achieve compliance. While IFRS 17 will involve new system requirements, the move can also be used to drive a more comprehensive improvement in management information systems. A number of tips for successful implementation include:
Invest in Experts
Although IFRS 17 is a new requirement for insurers, some consulting firms like Millennium Affine have already taken on similar IFRS implementation projects. Our experience implementing IFRS standards, such as IFRS 15, has demonstrated the benefits of using expert advice in terms of cost effectiveness, ensuring deadlines are met and project success rates.
Examine how IFRS 17 will affect information and system requirements beyond existing capabilities. Establish the main areas where financial statement reporting will require new information and process changes. If a finance team is undertaking IFRS 17 conversion assessments, an evaluation of the needed information and system changes should be part of the assessment.
Define the accounting policies your company will need to implement. There are various interpretations of the new IFRS 17 accounting standards, however, companies should apply their judgment to best interpret these principles and convert them to policies. These policies will be fundamental in the design of system refinements.
Adapt or Replace
Choose how to adapt systems to meet the needs arising from IFRS 17. Are separate systems to support IFRS 17 cheaper and more effective than fully integrating the changes into a finance and accounting system? At what level should the integration occur and what are the related cost/benefit tradeoffs?
With the adoption of IFRS 17, change is inevitable. The success of any software or process implementation is reliant upon the users. Most implementation failures occur because of people issues and not the technology. This is why it is important to manage the change through with organisational change management processes.
Allow enough time for implementation. Finance system projects have a tendency to take longer than expected. Pushing the timeline on an IFRS 17 conversion could result in missing a potential deadline and incurring costly fines or other penalties.
Consider Your Options
Consulting firms are able to take an agnostic approach and help you find the best software to meet your IFRS 17 needs. This ensures that your functional needs are met in a cost effective manner, and you are not implementing software that is too much or too little for your needs.
For more information around how you can obtain a competitive advantage and discover practical ways to achieve compliance whilst delivering valuable business benefits, why not attend our complimentary IFRS 17 Breakfast Briefing that takes place in London on November 16th. At the event you will hear about the forthcoming IFRS 17 changes and how technology can be instrumental in providing an effective solution.
For further information visit www.millenniumaffine.com/ifrs-17-briefing-london or contact Brendan on 0845 604 4262.