IFRS 17 presents a significant change in the way insurance companies and other financial services companies that issue insurance contracts must account for and report their financial performance under IFRS.  IFRS 17 will be mandatory for reporting periods beginning on or after January 1, 2021.  While the objective of IFRS 17 is to improve transparency and comparability, the standard is significantly detailed and complex, and will require considerable effort to implement.

Overview of IFRS 17 Model

The General Model (Building Blocks Model) is at the core of IFRS 17, augmented by:

  • The Variable Fee Approach –  for contracts with direct participation features.
  • The Premium Allocation Approach – a simplified approach for short-term contracts.

The building blocks include:

  • Discounted probability-weighted cash flows
  • An explicit risk adjustment
  • A Contractual Service Margin (CSM) that represents the unearned profit of the contract which is recognized evenly over the contract coverage period.

Changes in discount rates used may be recognized in Net Income or in Other Comprehensive Income (OCI) dependent on the entity’s choices under IFRS 9.

Impact Overview

  • Entities will be required to show a separate presentation of underwriting and finance performance. This will improve transparency about the sources of profits and the quality of earnings of the entity.
  • Cash basis accounting will no longer be used, rather; revenue will be recognized more consistently with IFRS 15
  • Historic assumptions will no longer be used to determine cash flows under IFRS 17. Cash flows will be based on current assumptions.
  • The impact of IFRS 17 will go beyond accounting. Actuarial and IT systems will be impacted, and entities will have to review their products and distribution departments to ensure compliance.

Next Steps

Implementing IFRS 17 will be a significant project and will require considerable resources. Starting early and putting together a good implementation plan is key to a successful implementation. Entities should:

  • Start early and appropriately plan the IFRS 17 implementation project ensuring appropriate resourcing.
  • Undertake an entity specific impact assessment, looking at both financial impact and operations impact.
  • Begin the process of communicating and educating staff and board level committees


How we can help

Our team offers a broad range of experience and deep technical expertise in IFRS implementation and accounting solutions. Our professionals have been delivering world class IFRS implementations and advisory services since 2009 in Canada and around the world. We can help your business with planning, analysis, implementation, and ongoing support related to IFRS and other unique accounting solutions that your business may need.

Howlite Consulting Inc.



+1 587 317 4481