Public sector bodies have been urged to review the scope of their insurance contracts following changes to International Financial Reporting Standard 17 by the Financial Reporting Advisory Board. The revision aims to make the reporting of risk transfer contracts more comparable between different entities.
The Government Actuary’s Department, which helped develop IFRS 17 application guidance for accounts within the scope of the government financial reporting manual, said public sector financial statements for 2025 to 2026 must comply with the standard.
The FRAB reconsidered IFRS 17’s scope to address uncertainty over government departments issuing contracts that include assurances for risks linked to the delivery of those contracts. Updated advice in the IFRS 17 Insurance Contracts supplementary application guidance clarifies that if a reporting entity awards a contract and issues an indemnity for risks the supplier faces, this may not meet the definition of insurance risk but could still fall within IFRS 17’s scope depending on the nature of the arrangement.
HM Treasury said some risks on the government balance sheet do meet the insurance risk definition. This occurs where one party accepts significant insurance risk from another party by agreeing to compensate them if a specified uncertain future event adversely affects them. Such agreements could be verbal or written, with or without a premium, and do not need to involve an insurance company, it said.
GAD is working with accounting specialists to interpret the revised requirements and help departments model and quantify disclosures so their accounts meet IFRS 17 by the end of the current financial year.
Source: cirmagazine.com
