International Financial Reporting Standards

Implementation of IFRS 17 ‘Insurance Contracts’

12 Aug 20212 min read
IFRS 17 heralds a new era of accounting for insurance contracts because it sets out principles-based requirements that aim to improve the comparability of the measurement and presentation of insurance contracts across entities reporting in jurisdictions applying International Financial Reporting Standards (IFRS).
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We are pleased to share ‘The auditor’s response to the risks of material misstatement arising from estimates made in applying IFRS 17 Insurance Contracts’.
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The impact of IFRS 17 will be felt by many stakeholders, including, but not limited to preparers of financial statements, those charged with the governance of entities that issue insurance contracts, investors, regulators, analysts and auditors.

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Who are the GPPC?

The GPPC comprises representatives of the six largest accounting networks being BDO, Deloitte, EY, Grant Thornton, KPMG and PwC.

With IFRS 17’s anticipated mandatory effective date of 1 January 2023 moving ever closer, all types of businesses, not just registered insurance businesses, need to start evaluating the impact of the Standard now. In particular audit committees should be considering the quality of the financial reporting of IFRS 17.

With this in mind, the Global Public Policy Committee (GPPC) has issued another paper which builds on the paper issued in 2020 ‘Implementation of IFRS 17 Insurance Contracts – Consideration for those charged with governance’ This additional paper focusses on the auditor’s approach to auditing estimates and associated judgements made in the application of IFRS 17.

Implementation of IFRS 17 ‘Insurance Contracts’
Implementation of IFRS 17 ‘Insurance Contracts’
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After an introduction, this paper is broken down into the following sections:

  1. how the auditor may assess the risk of material misstatement in financial statements arising specifically from the application of IFRS 17, including consideration of:
    1. the insurance entity and its environment
    2. the risk of material misstatement in estimates including inherent risks and control risks.
  2. the auditor’s responses to the assessed risks of material misstatement including testing how management made the accounting estimates and developing an auditor’s point estimate or range.
  3. data, information systems, processes and controls (including risk assessment, testing and impact on audit approach).
  4. financial statement disclosures related to accounting estimates and estimation uncertainty.
  5. other considerations for the auditor and the insurance entity, such as management bias and professional scepticism.

If you would like to discuss any areas of this paper in more detail, please contact your local member firm or Trisha LeBlanc, Grant Thornton Canada at trisha.leblanc@ca.gt.com.

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