Insurance contracts can involve cash flows extending decades into the future.
How do we measure those obligations today?
IFRS 17 establishes a comprehensive model for recognizing, measuring, presenting and disclosing insurance contracts.
At a high level, measurement incorporates:
• estimates of future cash flows;
• the time value of money and financial risks;
• an explicit adjustment for non-financial risk;
• and, where applicable, a contractual service margin, representing unearned profit.
The standard aims to recognize profit as insurance services are provided rather than simply when premiums are received.
In short: IFRS 17 attempts to show both the economics of insurance obligations and the profit earned from providing insurance services.
#IFRS #IFRS17 #Insurance #Accounting #FinancialReporting