Recognition and Valuation of an Insurance Contract in the Perspective of IFRS 17

Abstract

Objective: The purpose of the article is to present the significant changes IFRS 17 introduces in relation to the requirements of IFRS 4. Changes in the valuation of insurance contracts and the impact on reporting by insurance companies are presented. Indicating different approaches to the insurance contract, both for the legal and balance sheet purposes, is a second aim.

Research Design & Methods: A number of techniques was used to accomplish the study, including a broad analysis of legal acts regulating the concept of insurance contracts, an analysis of specialist literature, and comparability analysis techniques. An additional source of the information was financial statements from PZU Group preparing its reports annually in accordance with the requirements of the International Financial Reporting Standards.

Findings: Based on the research conducted, it was found that the recognition of an insurance contract for the purposes of balance sheet law is an approach that deviates from the applicable code definitions. However, the methodology for the valuation of insurance contracts will change, affecting the financial result achieved by insurance companies and the value in use of their financial statements. This will require the creation of new criteria for assessing the profitability of their activities. However, the assessment of the actual impact of these changes will be the subject of further research.

Implications / Recommendations: The introduction of the new IFRS 17 standard will require a change in the accounting policy of insurance companies using International Financial Reporting Standards in order to maintain the comparability of financial statements both in domestic and international aspects.

Contribution: The article looks at how the regulations concerning accounting in insurance companies will affect the value in using financial statements drawn up by insurers.