EP debate 1 October on IFRS 17 – Summary

Summary

On 1 October, during the EP plenary session, the European Commission made a statement on IFRS 17, further to the Question for Oral Answer (OQ) posed by MEP Theodor Stolojan (EPP) on behalf of the ECON Committee and ahead of the plenary vote on the Motion for a Resolution (MfR) on IFRS 17 on 3 October.

The Commission encouraged the industry to submit their issues to the IASB – through the TRG for implementation issues or though the development of solutions. The EC also referred to the 6 issues EFRAG raised and noted that the IASB is expected to consider both the issues and the request for delay in implementation at the IASB October Board meeting. MEPs raised the challenges with the implementation timeline and complexity of the standard.

Please find below a detailed summary of the key points made by the Commission and MEPs during the debate:

  • Commission statement – Andrus ANSIP (EC Vice-President for Digital Single Market)
      • The EC asked EFRAG to carry out an assessment of IFRS 17, specifically the impact on financial stability, competitiveness, markets, and long-term investments.
      • The EC also launched a study on IFRS 9 and equity investments, and on possible alternative accounting methods.
      • The EC acknowledges that the scope of the field testing is limited (given the implementation timeline of 1 January 2021).
      • Constituents have raised technical issues and EFRAG has subsequently referred to 6 issues.
      • The IASB set up a TRG and is expected to consider potential amendments as well as a request for deferral of implementation date at its October meeting.
      • The EC encourages the insurance industry to report implementation challenges to the TRG and actively develop realistic solutions when those cannot be solved by interpretation.
      • Fitness check on public reporting – the EC will specifically consider potential inconsistencies between IFRS 17 and existing frameworks (IAD and SII). The EC expects to report the findings by Q2/2019 to secure its capacity to undertake necessary action before the implementation date of IFRS 17 of January 2021.
    • MEP Theodor STOLOJAN (EPP, RO)
      • IFRS 17 represents a fundamental change bringing the benefits of consistency, transparency and comparability.The MfR adopted by ECON underlines the significant efforts and costs needed to implement IFRS 17. Signals received from insurance companies confirm the difficulty of implementation, which has been underestimated.
      • Reiterated regrets that there was no field test on the financial stability impacts.
      • ECON asks the EC and EFRAG to consider all signals sent by industry and to assess if the current implementation timeline is appropriate.
  • Pervenche BERÈS (S&D, FR)
      • The EP would like the EC to be vigilant, especially based on experience with IFRS 9. An ERSB study after the entry into force of IFRS 9 had shown that it may weaken long-term investment.
      • The EC needs to consider the MfR as well as EFRAG’s timeline.
      • IFRS 17 needs to meet cross-cutting objectives and contribute to the definition of public good and sustainability of our economy (long term investment and climate change policy).
  • Notis MARIAS (ECR, EL)
      • There are concerns that insurance markets and companies may not be ready (due to complexity of IFRS 17).
      • Only 10 % of smaller insurers are ready.
      • A discussion at EP level on a possible extension is needed.
  • Caroline NAGTEGAAL (ALDE, NL)
      • The costs of implementation are inevitable, but these are outweighed by the benefits.
      • The MfR looks at some of the guarantees that EFRAG calls for and results of surveys.
    • Miguel VIEGAS (GUE/NGL, PT)
      • IFRS 17 will have an impact on long-term contracts and profits, as well as the ability of insurers to react to unexpected events.
  • Lampros FOUNTOULIS (NI, EL)
      • IFRS 17 affects investors – an opt-in system for IFRS is needed.
      • Idiosyncrasies of each country need to be considered.
  • Doru-Claudian FRUNZULICĂ (S&D, RO)
      • It should be guaranteed that IFRS 17 would not pose a burden on SMEs while at the same time a high-quality reporting is necessary.
      • Greater involvement of the EP is needed in the implementation of IFRS 17.
      • The implementation of IFRS 17 needs to be carefully assessed – ex post impact assessment needed.
  • Bogdan Zdrojewski (EPP, PL)
      • Major difficulties with the timeline anticipated.
  • Andrus ANSIP (EC Vice-President)
    • The Commission will continue to monitor closely the endorsement of the standard and take into account the EP concerns to ensure that IFRS 17 is conducive to the European public good and its implementation does not put any undue strain on the European insurance industry.