Last week, Moscow hosted the ASN Financial Summit ‘Year-End Closing Under New Rules’, where FBK Senior Partner and ACCA member Anastasia Terekhina spoke at the session ‘Auditor's Perspective: What and How Will We Review Under the New Rules?’
Anastasia summarised the application of IFRS 17 ‘Insurance Contracts’ in Russia for 2025 and highlighted the main ‘red flags’ for auditors to focus on. To recap, insurers, mutual insurance societies, and non-state pension funds (NPFs) were permitted to defer the initial application of the standard to periods beginning on or after 1 January 2025.
IFRS 17 ‘Insurance Contracts’ has fundamentally transformed reporting structures: instead of the familiar ‘insurance premiums’ and ‘reserves’, there is now insurance revenue, liabilities for incurred claims, and the contractual service margin. These changes require more than a technical overhaul of accounting – they necessitate a deep reevaluation of revenue and expense recognition principles.
Ms. Terekhina paid particular attention to common errors in transitioning to IFRS 17:
- misclassification of contracts into portfolios and cohorts;
- lack of substantiation for the loss component of onerous contracts;
- accounting policies that fail to meet the standard's requirements;
- discrepancies between accounting and actuarial data;
- errors in calculating the risk adjustment and financial income/expense.
The expert pointed out that even where there is no material change in the liability amount, the quality of disclosures and the soundness of professional judgments will be the primary focus for auditors. This is especially relevant for NPFs and life insurers, where transition effects are most profound.
‘The transition to IFRS 17 is not a one-off compliance task but a process requiring coordinated efforts from accounting, actuarial, and operational units. For the 2025 reporting, auditors will already be scrutinizing not just the figures but the logic behind them’, emphasized Anastasia Terekhina.
