What to Expect from the New International Financial Reporting Standards in 2022?
The International Financial Reporting Standards Board (IFRSB) announced in March 2020 the delay of the new IFRS standards by one year. The new implementation date for IFRS 17 Insurance Contracts, IFRS 9 Financial Instruments, and IFRS 15 Revenue from Contracts with Customers is January 1, 2023. This extension allows more time for companies to implement the new standards correctly, which will have a significant impact on the financial statements of the affected entities.
Background
IFRS is a globally recognized set of accounting standards that companies follow when preparing their financial statements. These standards are designed to promote transparency and comparability in financial reporting across all industries and countries. They are updated and revised regularly to ensure that the accounting practices align with current market conditions and investor expectations.
IFRS 17 Insurance Contracts
IFRS 17 is a new standard that will replace IFRS 4 that currently applies to many insurance contracts. The new standard requires insurance contracts to reflect the amount, timing, and uncertainty of future cash flows. Entities will need to separate the insurance component from the financial component of the contract. The new standard also requires a more detailed assessment of the risks associated with the insurance contracts.
IFRS 9 Financial Instruments
IFRS 9 is a replacement for IAS 39 for the accounting of financial instruments. The new standard introduces new classification and measurement requirements for financial assets and liabilities. It also introduces an expected credit loss model, which requires entities to recognize expected credit losses earlier than under the current standard. The new model aims to give investors a more accurate view of the credit risk in the financial statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 is a new standard that replaces IAS 18 and IAS 11 for the accounting of revenue from contracts with customers. The new standard provides a framework for recognizing revenue that is more principles-based and less prescriptive than the current standard. It aims to provide a more accurate and consistent view of revenue by creating a five-step model to be applied to all contracts with customers.
Conclusion
The new IFRS standards are intended to promote transparency and comparability in financial reporting across all industries and countries. The new standards – IFRS 17 Insurance Contracts, IFRS 9 Financial Instruments, and IFRS 15 Revenue from Contracts with Customers – have been delayed until January 1, 2023, to allow companies to prepare adequately. These standards will have a significant impact on financial statements. Companies need to begin planning for the implementation of these new standards to ensure they have the necessary resources and expertise in place to make a smooth transition.
