Abstract
In June 2020 the International Accounting Standards Board (IASB) issued an amended International Financial Reporting Standard (IFRS 17: Insurance Contracts (IFRS 17), a standard which aims to ensure consistency in the accounting for insurance contracts across the world. The effective date of the standard is financial years commencing on or after 01 January 2023. Insurers had two and a half years from the date of the amendment to implement IFRS 17. The implementation of IFRS 17 does not only impact the accounting function, therefore insurers should not underestimate the impact of the implementation on the entity at large, including systems, data, and other functions and business processes.
However, there is limited research on the implementation of IFRS to assist the insurers in understanding the IFRS implementation process, including the challenges that they may face during the implementation and how to respond to those challenges. Therefore, the objective of this research is to explore the IFRS 17 implementation process for South African state-owned short-term insurers (classified as public sector non-life insurers) to assess the readiness and to assist implementers with an implementation approach for future IFRS implementation projects.
Qualitative research methods were used as a research methodology. The study collected data through open-ended questions from semi-structured interviews with the persons responsible for implementing IFRS 17 in the South African state-owned non-life insurers. A thematic analysis was used to analyse the data that was collected. The results of the analysis were reported as identified themes in the research findings.
The study found that sufficient project management and governance structures are necessary to ensure adequate oversight of the implementation. Given that IFRS 17 requires inputs from different areas of the entity, the study confirmed that various functions within entities are jointly responsible for the implementation. Since the standard is technical and complex in nature, the study found that consultants are normally required to assist with the implementation and that training is a prerequisite to ensure successful implementation. The implementation commenced on different dates and different coordination implementation approaches were followed by
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implementers. To ensure successful implementation, various assurance providers were engaged in the process to actively manage the assurance risks.
Furthermore, the study found that IFRS 17 significantly changes the presentation and disclosure of the non-life insurance business annual financial statements. Certain business processes, data, and Information Technology (IT) systems are also affected by the implementation of IFRS 17, while other business processes and products are not. Given the wider impact of the implementation of IFRS 17, the study found that buy-in and change management are necessary when implementing the standard.
Lastly, the study found that implementers experience several challenges when implementing the standard, and that the key challenges include human resource capacity and IT systems. As a result, most state-owned non-life insurers were not ready to implement the standard by the effective date, 01 April 2023. The key lessons to ensure successful implementation include: educating the IFRS 17 input contributors to ensure effectiveness in the process; adequate and appropriate training for the implementers to ensure that they acquire the expertise; appointing a consultant to assist with the implementation, as well as dedicating a team to focus solely on the implementation to ensure that the project receives the attention it deserves; and lastly, implementing appropriate systems that are able to handle the data and the complexity of the calculations.
KEYWORDS: IFRS 17, IASB, Insurers, Presentation and disclosure, Annual financial statements, Implementation processes, Business areas and Challenges and the related solutions.