Lobby group Insurance and Pensions Denmark (IPD) has welcomed the EU’s approval of the new IFRS 17 accounting standard for listed companies in the 28-country bloc, after what it said had been a “fierce battle”.
Under the new rules, Danish pension providers would not have to apply the grouping requirement referred to as the “annual cohorts,” something IPD said would have been very expensive to do, without adding much value to accounts.
Kent Damsgaard, chief executive officer of the association, said: “We are incredibly pleased that the EU has finally approved the new accounting standard that makes financial reporting more consistent and comparable.
“It will increase transparency for our investors. In addition, it will contribute to a better understanding of the insurance and pension industry’s business model,” he added.
IPD told IPE that the scrutiny period for the endorsement of the new standard, including the rules surrounding annual cohorts, ended on 22 October, with no objections raised by the European Council or Parliament, and that it expected these would enter into law by the end of November.
The lobby group said the legislation had taken 20 years to develop, and another four to get approved by the EU, during which time the Danish association had “fought a fierce battle” together with the European insurance industry to add the option of not applying the annual cohorts concept.
“The life insurance companies made robust demands for the change in the requirement on annual cohorts,” said Damsgaard.
This was because the requirement would have added no significant information value to the accounts, he said, and also because implementing and operating the annual cohorts would have entailed high costs.
“We are really pleased that the EU has listened to the Danish requirements and that it has succeeded in finding an acceptable solution,” the CEO said.
The solution now approved by the EU means companies can choose whether to use IFRS 17 as issued by the International Accounting Standards Board (IASB), or whether to use IFRS 17 with the amendment given in the EU, according to IPD.
If IFRS 17 is used outside the EU, it said, then the rules must be used as issued by the IASB.
The European Commission has to review the exemption from the requirement to use the annual cohorts by 31 December 2027, IPD said.
Because IFRS 17 is implemented as a supplement to the IAS Regulation, it said the standard applied directly to the companies covered, and there was no requirement for implementation in Danish regulation.
Back in July, lobby group Insurance Europe announced its support for the Commission’s proposed amendments to the IFRS 17 accounting standard, saying the annual cohorts amendment gave European insurers the option “to exempt intergenerationally-mutualised and cash flow matched contracts from the annual cohort requirement of IFRS 17.”