Document Type : Original Research Paper

Authors

• Tooba Haghighat ¹
• Mahnaz Molanazari ²

¹ 1PhD Candidate, Department of Accounting, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran.

² 2Associate Professor, Department of Accounting, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran.

Abstract

BACKGROUND AND OBJECTIVES: International Financial Reporting Standards (IFRS) were developed to promote transparency, comparability, and financial stability in global markets by providing a common financial reporting language. Despite this, the insurance industry has traditionally lacked a unified reporting standard, which has hindered transparency and comparability. IFRS 17, replacing IFRS 4, introduces a consistent, principle-based framework for insurance contract accounting. It aims to improve the reliability of financial statements by requiring uniform valuation, revenue recognition, and disclosure using current assumptions, expected future cash flows, and a risk adjustment to more accurately reflect insurance obligations. Recent research has focused mostly on the challenges of IFRS 17 implementation, such as technical complexity and readiness, but little has been said about its financial impacts, especially in developing countries like Iran. With Iran’s insurance sector still evolving and aligning with global practices, evaluating the effects of IFRS 17 is essential for regulators and stakeholders. This study investigates the impact of IFRS 17 on the financial statements of Iranian insurance companies, examining changes in revenue recognition, reserve valuation, equity levels, and profit volatility. It also considers implementation costs, training needs, and structural issues specific to Iran’s regulatory and operational context.
METHODS: This research employs a qualitative approach to gain in-depth insight into industry perspectives. The study began with two focus group sessions held at the Central Insurance of the Islamic Republic of Iran and the Professional Association of the Insurance Industry. These sessions brought together senior professionals and stakeholders to discuss the implications, expected benefits, and anticipated challenges of IFRS 17 implementation. Following the focus groups, purposive sampling was used to select participants for in-depth interviews. A total of 23 experts—comprising CEOs, CFOs, accounting managers, board members, and actuaries from prominent insurance firms—were interviewed using semi-structured guides. The data collected were analyzed using thematic content analysis. This method involved systematically coding the interview transcripts, identifying recurrent themes, and organizing them into categories reflecting shared concerns, expectations, and recommendations. The rationale for using a qualitative method was to capture rich, nuanced insights from experienced professionals that might not be evident through quantitative surveys. This approach allowed the researchers to explore the underlying reasoning behind stakeholder attitudes and reactions to IFRS 17.
FINDINGS: The thematic analysis produced several major findings. A key theme was the enhancement of financial reporting transparency. Participants highlighted that IFRS 17 ensures more accurate revenue recognition, improves fair value measurement of insurance liabilities, and enhances disclosure of cash flows and reserves much better. These elements improve comparability and build investor confidence. Another critical theme was risk management. The standard facilitates the early identification of onerous contracts, supports prudent reserve allocation, and requires up-to-date discounting methodologies. Such features contribute to more robust capital management, allowing companies to better align reserves with underlying risks and avoid unexpected shortfalls. Despite these benefits, several implementation challenges were noted. These include the high costs of upgrading IT infrastructure, the need for sophisticated actuarial models, and resistance to change within organizations. Participants mentioned that transitioning from legacy systems demands both financial and human resource investment. Structural consequences were also reported. For example, the use of market-based discount rates tends to increase the present value of liabilities, leading to reduced equity and shifts in profitability timing. This has significant implications for investor communication and performance metrics, particularly in the early years of adoption. Overall, the standard was perceived as a driver of long-term improvement. Benefits include reduced earnings volatility, enhanced measurement of insurance obligations, and improved clarity in financial notes. Participants agreed that IFRS 17 sets a solid foundation for aligning Iranian insurers with global best practices.
CONCLUSION: The results indicate that IFRS 17 introduces transformative changes to the financial reporting landscape of the Iranian insurance industry. Standardizing key accounting practices improves transparency, risk management, and strategic planning.While initial implementation may be costly and disruptive, the long-term advantages—such as enhanced market confidence, regulatory alignment, and investor attractiveness—are substantial. For effective execution, stakeholders should prioritize training, upgrade their accounting infrastructures, and engage actively with regulators. Support from regulatory bodies such as the Central Insurance of Iran will be vital in overcoming resistance and ensuring consistency in application. If properly implemented, IFRS 17 can significantly enhance the credibility and global competitiveness of Iranian insurance firms, laying the groundwork for a more trustworthy and resilient financial system.

Keywords

• Companies
• Financial statements of insurance
• Insurance contracts
• International financial reporting
• Iran’s insurance industry
• Standard 17 (IFRS 17)

Main Subjects

• Insurance Companies Accounting and International Financial Reporting Standards