INTERNATIONAL MULTIDISCIPLINARY JOURNAL FOR
RESEARCH & DEVELOPMENT
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REASONS WHY INSURANCE COMPANIES CANNOT APPLY INTERNATIONAL
FINANCIAL REPORTING STANDARD №15 “REVENUE FROM CONTRACTS WITH
CUSTOMERS”
Abdusaidov S.Dj.
PhD doctoral of SB TSEU
Abstract:
The article examines the reasons why insurance companies cannot apply the IFRS 15
standard for revenue recognition. It analyzes the features of insurance activities, including the long-
term nature of liabilities, uncertainty of payments and the specifics of insurance premiums that do
not comply with the principles of this standard.
Keywords:
IFRS 15, IFRS 17, insurance companies, revenue recognition, insurance contracts,
financial statements, accounting for liabilities, insurance premiums, risk, accounting standards.
International Financial Reporting Standards (IFRS) play a key role in ensuring the transparency and
comparability of financial data of organizations around the world. One such standard is IFRS 15,
which regulates the recognition of revenue from contracts with customers. However, applying this
standard to insurance companies is complex due to the specifics of their activities, including the
nature of their income and liabilities. This article will consider the reasons why insurance companies
cannot apply IFRS 15 in full, and also provide the opinions of academics and analysts on
approaches to revenue recognition in the insurance industry. IFRS 15 was adopted in 2014 and came
into effect in 2018, replacing previous standards related to revenue recognition. It is based on the
concept that revenue should be recognized based on the satisfaction of the obligation to transfer a
good or service to a customer. The standard includes a five-step revenue recognition process:
identifying the contract with the customer, determining the performance obligations, determining
the contract price, allocating the contract price between the obligations, and recognizing revenue as
the obligations are fulfilled.
However, insurance companies operate in a slightly different system, where the main characteristic
of their activities is the risk they assume, as well as specific terms of contracts. This leads to the
need to apply a different approach to revenue recognition.
Research on the application of IFRS 15 in the insurance industry emphasizes that this standard does
not take into account key aspects of insurance operations, such as insurance risk and premium
distribution. Thus, according to M. Hanson (2019), the IFRS 15 standard is not suitable for
insurance companies, since its main focus is on the transfer of goods and services, while insurance
companies do not sell specific goods or services in the classical sense of the term.
S. Petrova (2020) notes that the IFRS 17 "Insurance Contracts" standard, which was developed
taking into account the specifics of this industry, is more suitable for insurance companies. Unlike
IFRS 15, IFRS 17 focuses on the recognition of income from insurance contracts and takes into
account the long-term nature of these obligations, which is important for accurately assessing the
financial performance of insurance activities.
In order to analyze the reasons why IFRS 15 cannot be applied to insurance companies, it is
important to consider several key factors:
1.
Nature of the business. In the insurance industry, the main product is risk, not a physical
product or standard service. The insurance premium is not a fixed income, but reflects the price for
accepting risk.
2.
Features of revenue recognition. The IFRS 15 standard assumes revenue recognition at the
time of transfer of goods or services to the buyer, while in the insurance business, income is
INTERNATIONAL MULTIDISCIPLINARY JOURNAL FOR
RESEARCH & DEVELOPMENT
SJIF 2019: 5.222 2020: 5.552 2021: 5.637 2022:5.479 2023:6.563 2024: 7,805
eISSN :2394-6334 https://www.ijmrd.in/index.php/imjrd Volume 12, issue 03 (2025)
115
recognized as the insurance contract is fulfilled, which requires taking into account time and
changes in risks.
3.
Long-term liabilities. Insurance contracts are often concluded for long periods, which leads
to the need to recognize revenue as the contract is fulfilled, and not at the time of contract inception.
IFRS 15 does not provide mechanisms for accounting for such long-term liabilities.
4.
Risks and uncertainty. Insurance companies face a high degree of uncertainty regarding
payments that may be made for insured events, as well as the need to account for a reserve for future
payments, which is not consistent with the principles of IFRS 15.
Based on the analysis, it can be concluded that IFRS 15 cannot be applied to insurance companies
due to the specific nature of their activities and revenue recognition features. Unlike traditional
companies working with goods or standard services, insurance organizations interact with risks, not
physical objects. This requires the use of different accounting methods, such as those provided for in
the IFRS 17 standard. It should be noted that insurance companies need more flexible and specific
approaches to revenue recognition that take into account the long-term nature of liabilities and the
unique risks inherent in insurance contracts. It is important to continue developing standards that
will help to more accurately and correctly reflect financial results in the insurance sector, while
ensuring transparency and comparability with other industries.
References
1.
Хэнсон, М. (2019). Применение МСФО 15 в страховой отрасли: проблемы и решения.
Журнал финансового учета, 34(2), 67–82.
2.
Петрова, С. (2020). МСФО 17: новый взгляд на признание выручки в страховой
отрасли. Финансовая аналитика, 28(4), 45–56.
3.
Международный стандарт финансовой отчетности № 15 «Выручка по договорам с
покупателями». (2014). Международные стандарты финансовой отчетности.
4.
Косинова, В. Н., and Д. М. Магомсдова. "ВНЕДРЕНИЕ МСФО В СТРАХОВОЙ
РЫНОК РФ."
Экономика и социум
5 (5) (2012): 422-426.
5.
Алексеева, Г. И. "Особенности оценки финансового состояния страховой компании по
данным МСФО-отчетности."
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