REASONS AND PROBLEMS OF APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARD №17 “INSURANCE CONTRACTS” IN INSURANCE COMPANIES

Аннотация

The article analyzes the reasons and problems associated with the implementation of the IFRS 17 Insurance Contracts standard in insurance companies. The key changes introduced by the standard are considered, including a new approach to assessing insurance liabilities, accounting for profit and loss, and financial reporting requirements. Keywords: IFRS 17, insurance companies, financial statements, insurance contracts, accounting for liabilities, discounted cash flows, actuarial calculations, accounting standards, transparency offinancial data, regulatory requirements. International Financial Reporting Standards (IFRS) are an important tool for ensuring the transparency and comparability of financial statements of organizations. Among them, the standard IFRS 17 "Insurance Contracts", which entered into force on January 1, 2023, is one of the most significant for the insurance industry. This standard was adopted to improve the methodology for accounting for insurance contracts and ensure a more accurate and consistent reflection of financial results. However, the application of IFRS 17 in insurance companies is associated with a number of problems and difficulties due to the specific nature of their activities and the high complexity of the new approach. This article discusses the reasons and problems of applying IFRS 17ininsurance companies, and provides theopinions ofscientists and analysts on thisissue. International Financial Reporting Standard No. 17 was adopted in 2017 and entered into force a few years later. The main objective of its introduction was to ensure more accurate accounting of income and liabilities under insurance contracts, as well as to improve the comparability of financial statements of various insurance companies around the world. The standard replaced the previous IFRS 4 Insurance Contracts, which did not provide sufficient detail and flexibility to adequately reflect therisks and liabilities ofinsurance companies. IFRS 17introduces a comprehensive approach to accounting for insurance contracts based onthe principles of measurement based on the current cost basis, including the calculation of payment obligations and updating these obligations as risk information changes. However, this standard raises a number of implementation difficulties due to the unique features of the insurance business. According to research conducted by various scientists, in particular, F. Lewis (2021), the implementation of IFRS 17 will require significant costs for upgrading information systems, developing new risk assessment methods and training personnel. This becomes especially challenging for companies operating in emerging markets, where the level of readiness for such changes may below. Research and academic opinions on the implementation of IFRS 17 highlight both the benefits and challenges that insurance companies face when transitioning to the new standard. According to P. Stevens (2020), IFRS 17 significantly improves financial transparency and allows for more accurate accounting of long-term liabilities of insurance companies. However, he also notes that the implementation of such an approach will require a huge effort to revise all accounting https://ijmri.de/index.php/jmsi volume 4,issue2,2025 129 processes and maybeassociated withhigh costs for revising existing systems. M.Johnson (2022) emphasizes that the main challenge for many insurance companies will be the need to account for new liabilities and assets based on discounted cash flows, which requires more complex and accurate calculations. This can cause problems for insurance companies that donotyet have the necessary analytical toolsfor such calculations. Whenimplementing IFRS 17,insurance companies faceseveral importantchallenges: 1. Implementation and adaptation costs. The transition to the new standard requires significant investments in upgrading information systems and training staff. It is estimated that these costs can amount to millions of dollars for large companies and are especially noticeable forsmaller insurers. 2. Complexity in measuring liabilities and assets. IFRS 17 introduces the principle of measuring liabilities at current value, which requires the use of complex models for calculating cash flows associated with payments under insurance contracts. This may lead to increased complexityof financial statements andtheneed formore frequent updates toestimates. 3. Changes in the approach to accounting for profit and loss. The standard requires recognition of revenue and expenses based on the principles of “cash flows” and “actuarial calculations”. This may significantly change the order of recognition of income and expenses at insurance companies and affect financial results, which raises concerns among investors and shareholders. 4. Risks for companies with long-term contracts. Insurance companies that deal with long- term contracts, such as annuities or pension products, face additional challenges in estimating futurebene