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A4A – ACCSPIN
-UNDERSTANDING IFRS 17 -
The first video tackles about the benefits and reasons why IFRS 17 has been developed,
changes brought by the standard to balance sheet and income statement, measurement of
insurance contract liabilities and its components.
The reasons for issuing the standard are the need for a common global insurance
accounting standard, long-term and complex insurance risks are difficult to reflect in the
measurement of insurance contracts and some previous insurance accounting practices
permitted under IFRS 4 did not adequately reflect the true underlying financial positions or the
financial performance of these insurance contracts.
FCF is composed of the estimate of the future cash flows and adjustment to reflect the
time value of money and the financial risks related to the future cash flows, to the extent that the
financial risks are not included in the estimates of the future cash flows. Furthermore, the
discount rate (paragraphs B72–B85) that should be used is the current market-consistent
discount rates.
Risk adjustment for non-financial risk (paragraphs B86–B92) wherein an entity adjust the
estimate of the present value of the future cash flows to reflect the compensation that the entity
requires for bearing the uncertainty about the amount and timing of the cash flows that arises
from non-financial risk.