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IFRS 17 Insurance contracts - Part 4
I raised a poll on IFRS is easy's LinkedIn page and here is the result.
|Note that the results here are not necessarily correct. Please continue reading for the correct answer.|
Say today is 18 December and you approach an airline (whose accounting year end is 31 December) to book a flight that you intend to take on 2 January. The flight takes approximately 24 hours, so you get to your destination on 3 January. What date do you think the airline will recognize revenue?
The above explains why recognition date is an important concept in all accounting standards.
Under IFRS 9, on the day you become a party to the contractual provisions of a financial instrument, you are required to start recognizing the instrument in your books. So what does IFRS 17 say about recognition?
Now let's go back to our poll.
IFRS 17 extends its requirements because of the peculiarity that comes with transacting with policyholders.
The standard requires companies to recognise a group of insurance contracts issued from the EARLIEST of the following:
- the beginning of the coverage period of the group of contracts;
- the date when the first payment from a policyholder in the group becomes due; and
- for a group of onerous contracts, when the group becomes onerous.
The coverage period starting from 1 Jan is the earliest date in the poll options.
Yes! You made it to the end.
I will be happy to receive any questions you may have about the topic discussed in this blog post.
Share in the comment section about the misconceptions you once had about IFRS 17.
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