IFRS 14 plays a key role in endorsing transparency, consistency, and comparability in financial reporting. It offers strategies for regulatory reporting by organizations in the insurance sector. Therefore, it is imperative for businesses to seek the expert service of Audit Firms in Dubai to effectively implement IFRS standards in compliance with the statutory regulations.
Key Components of IFRS 14
Here are some key components of IFRS 14:
- Regulatory deferral account balances
Regulatory deferral account balances are equilibriums that ascend when a body provides goods or services to customers at a price or rate that is subject to rate regulation.
- First-time Adopters
IFRS 14 allows a first-time adopter of IFRS Criteria. This criterion is within its range to continue to identify and measure its regulatory deferral account balances in its primary and subsequent IFRS financial statements in line with its prior GAAP when it adopts IFRS Standards.
- Temporary Provisions
IFRS 14 offers direction on transitioning from prior accounting criteria to the requirements of IFRS 14. It offers selections for applying the standard with hindsight or through an adapted retrospective approach. It takes into attention practicality and comparability.
- Measurement and Recognition
IFRS 14 sets out standards or principles for measuring and recognizing insurance contracts. It mandates insurers to evaluate the probability of future cash flows and recognize insurance revenue consequently. It also delivers direction on;
- Early Recognition
- Consequent Measurement
- Reinsurance Arrangements
Practical Tips for Implementing IFRS 14 in Dubai
These tips include and are not limited to:
1) Comprehend the Standard
To effectively implement IFRS 14, it is essential to carefully understand its principles, standards, and definitions.
Compliance with the scope and standards of implementation is essential, as well as the major concepts of recognition, measurement, presentation, and disclosure of insurance contracts as discussed above. This will help you to create a robust foundation for implementing the essential changes.
2) Classify Your Regulatory Deferral Account Balances
IFRS 14 permits units to recognize definite regulatory deferral account balances, which are created when regulatory units require or need insurers to submit recognition of explicit items in their financial statements.
Evaluate and classify these balances. It ensures that they are aptly accounted for under IFRS 14. Consider any essential adjustments required and the influence of these balances on the financial statements.
3) Make the Essential Disclosures
IFRS 14 highlights the status of clear and informative financial reporting. Analyze the disclosure requirements sketched in the criteria and ensure compliance.
Classify the explicit information associated with insurance contracts that require to be disclosed in the financial statements and associated notes. Communicate related information regarding the risks, nature, and financial influence of insurance contracts to the workers of the financial statements.
4) Regulate the Suitable Accounting Policies
Analyze and evaluate your current accounting policies associated with insurance contracts. Classify any variations with IFRS 14 and make the essential adjustments.
Develop complete and strong accounting policies that bring into line with the requirements of the standard. It ensures the following;
- Correct Recognition
- Presentation of Insurance Contracts
5) Start Timely
Implementation of IFRS 14 can be a difficult process that needs careful planning and execution. Start the employment process well in advance to let adequate time for;
- System Upgrades
- Data Collection
- Staff Training
Timely preparation will support and alleviate possible challenges. It also ensures a smoother transition to the new reporting standards.
6) Connect with Investors
Operative communication with investors is important during the adaptation of IFRS 14. Engage with related parties to ensure a shared understanding of the changes and their implications, such as;
- Senior Management
- Finance Teams
- Regulatory Bodies
Communicate the improvement of the implementation, provide updates on the impact on financial statements, and address any concerns or questions.
Seek the Expert Services of Audit Firms in Dubai
To effectively implement IFRS 14 in compliance with the statutory regulations and standards, businesses are advised to seek the expert service of top Audit Firms in Dubai. Therefore, contact us today and we shall be glad to assist you.
Theshani is a Senior auditor and has experience of 4+ years in providing audit assurance and advisory services to a wide range of industry clients. She continues to stay on top of ever-changing industry dynamics by continuously learning and developing expertise.