When it comes to the rapidly approaching implementation date of the accounting standard IFRS 17 there is one message that stands out above all others – now is the time to accelerate.
That is the advice of Alex Bertolotti (pictured), the UK insurance leader and global head of IFRS 17 at PwC, who highlighted that the standard must be endorsed by the EU by January 01, 2023. The shortest timeframe for the application is 18 months, he said, so there isn’t much time left.
As a firm, PwC handles over 250 of these projects with nearly 3,000 people involved, so IFRS 17 is a matter of great concern for Bertolotti and his team and now, with only two years to go, the implementation is entering an phase. What makes IFRS 17 so fascinating, he said, is that previously there was such a mishmash of accounting applications for insurance companies globally. IFRS 17, meanwhile, is a culmination of 20 years of discussion and negotiation and is already creating significant change in the global insurance market.
Where companies stand today can be broadly divided into three tiers, the first being the major multinationals that apply IFRS and are coming towards the end of their journey. These are between a year and two years away from finalisation. The internal project teams of PwC’s top 30 clients come together every two months to brainstorm the current issues facing these projects, he said, and to determine and contextualise where their clients are on a standard IFRS 17 journey.
“So, we’ve seen them move over the past three or four years at various states of speed,” he said. “The big [organisations] are heading towards the end and the big issues that they’re dealing with are KPIs, transition, testing, parallel runs. The next level down are entities which have now done their impact assessments and are just starting on that long journey that the others have been on for three or four years. And then there’s a huge pile of companies globally that haven’t started yet at all.”
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For those companies which haven’t started yet there is a lot to do, Bertolotti said, and the basics of what is required - from granular data, to effective systems and processing, to key accounting decisions - all take time. Another area which is also a cause for concern regards the availability of people over the next two years. There aren’t that many people out there who have the specific technical, accounting actuarial and data skills required.
“So, the ability to either keep hold of your people or to recruit people in, or to secure them if you’re using contractors, is starting to become a bigger issue,” he said. “To give an idea of this, we looked at the Asia-Pac market and there are 1,200 companies on there from an initial glance who will need to do IFRS 17. This is a lot - and if you look globally there are 85 territories that use IFRS for insurance companies. So there’s a lot of demand and the question is - how do you get hold of supply?”
It’s not all bad news for businesses which haven’t started yet, however, as they are in the desirable position of being able to take all the learnings from the projects that have come before them. In addition, things such as vendor solutions and software solutions are more advanced now and more effective than they were two or three years previously.
“There’s a lot of accelerators out there,” he said. “One of my teams presented to me [recently] from South Africa and they’ve put together a documentation tool, which enables you to document all 120 technical accounting decisions you’re going to need to make, to store it in the right place, to refer it back to the standard, etc. Accelerators like that are now available when they weren’t two years ago. So, plug in with somebody who’s got them and use them.”
Bertolotti believe it’s essential to remember that IFRS 17 is not just an accounting standard. Most people are using it to enact some elements of change in their organisation, he said, recalling the words of a committee chair peer in a recent discussion on the subject of the implementation who noted, “once you’ve opened the bonnet, you might as well fix a few things.”
