The Insurance Council of Australia (ICA) has expressed support for the Australian Accounting Standards Board’s (AASB) submission over draft changes to a new accounting rule.

AASB 17 is issued by the board and is based on the International Accounting Standards Board’s (IASB) new IFRS 17, which will apply to annual reporting periods starting on or after January 1 2021.

Consultation closed last month over amendments the IASB proposed for the new rule. Areas that would be affected by the proposed changes include expected recovery of insurance acquisition cash flows, presentation in the statement of financial position, applicability of risk mitigation option and scope exclusions.

The AASB submission expressed concerns in three areas:

• The scope of the proposed change to reduce the accounting mismatch between reinsurance contracts held and recognition of underlying onerous contracts is not broad enough to deal with the variety of reinsurance contracts that are used in practice and ensure that arrangements that are economically identical are treated consistently;
• The treatment of acquired contracts under IFRS 17 is not consistent with insurers’ business models, will potentially confuse users and will incur significant costs;
• We prefer that the principle in IAS34.28, that the frequency of an entity’s reporting shall not affect the measurement of its annual results, should not be overturned by IFRS 17.

Click here for the AASB submission.