STRATEGIC REPORT
GOVERNANCE
financial statements
1 SIGNIFICANT ACCOUNTING POLICIES continued Based on the assessment performed above, the Directors conclude that it remains appropriate to value assets and liabilities on the assumption that there are adequate resources to continue in business and meet obligations as they fall due for the foreseeable future, being at least 12 months from the date of signing this report. Furthermore, the Directors note that in a scenario where the Group ceases to write new business the going concern basis would continue to be applicable while the Group continued to service in-force policies. The Directors’ assessment concluded that it remains appropriate to value assets and liabilities on the assumption that there are adequate resources to continue in business and meet obligations as they fall due for the foreseeable future, being at least 12 months from the date of signing this report. The Directors also considered the findings of the work performed to support the long-term viability statement of the Group in the Risk management section of the Annual Report and Accounts, which is undertaken together with the going concern assessment. The Board and Audit Committee considered going concern over 12 months as well as the consistency with the longer-term viability of the Group, reviewing this over five years. Accordingly, the going concern basis has been adopted in the valuation of assets and liabilities. ii) New accounting standards and new significant accounting policies The following amendments to existing accounting standards are effective from 1 January 2022 but do not have a significant impact on the Group’s financial statements. The amendments include clarifications that are not inconsistent with the Group’s existing accounting treatment and other insignificant changes. • IFRS 3, Business combinations – Amendments to references to the conceptual framework for financial reporting in order to avoid the unintentional recognition of day-two gains following revisions to the conceptual framework in 2018; • IAS 16, Property, plant and equipment – Amendments in respect of proceeds before intended use that prohibits deducting proceeds from selling items from the cost of an item of property, plant and equipment; • IAS 37, Provisions, contingent liabilities and contingent assets – Amendments in respect of costs of fulfilling a contract to clarify that such costs include both direct costs and an allocation of costs that relate directly to fulfilling the contract. The following new accounting standards and amendments to existing accounting standards have not yet been adopted and are expected to have a significant impact on the Group. • IFRS 9, Financial instruments (effective 1 January 2018). Amendments to IFRS 4, Insurance Contracts, published in September 2016 and adopted by the Group with effect from 1 January 2018, permits the deferral of the application of IFRS 9 until accounting periods commencing on 1 January 2023 for eligible insurers. Just continues to defer IFRS 9. If the Group had adopted IFRS 9 it would continue to classify financial assets at fair value through profit or loss. Therefore, under IFRS 9 all financial assets would continue to be recognised at fair value through profit or loss and the fair value at 31 December 2022 would be unchanged at £23,474.1m. As well as financial assets, the Group also holds Insurance and other receivables and Cash and cash equivalent assets, with contractual terms that give rise to cash flows on specified dates; the fair value of these investments is considered to be materially consistent with their carrying value. • IFRS 17, Insurance contracts (effective 1 January 2023). i) IFRS 17 Background IFRS 17 Insurance Contracts was issued in May 2017 with an effective date of 1 January 2021. In June 2020, the IASB issued an amended standard which delayed the effective date to 1 January 2023. The amendments issued in June 2020 aimed to assist entities implementing the standard. During 2022, the IASB Interpretation Committee (“IFRIC”) signalled its conclusion regarding the approach to assessing coverage units for annuity contracts in payment and this has been adopted in Just’s approach. IFRS 17 was approved for adoption by the UK Endorsement Board in May 2022. Results in the 2023 financial year will comply with IFRS 17, with the first Annual Report published in accordance with IFRS 17 being that for the year ending 31 December 2023. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4, Insurance Contracts. IFRS 17 represents a significant conceptual change from IFRS 4, with recognition of profits over lives of contracts instead of mainly at point of sale for annuity business. Furthermore, recognition of demographic and expense assumption changes will also be deferred under IFRS 17, with recognition over the remaining lives of contracts, which will result in reduced volatility in reported profits in future. There is no change to the interpretation of significant insurance risk and its application to Just’s products, and hence the scope of contracts within IFRS 17 is consistent with IFRS 4. IFRS 17 Project The Group has deployed a cross-functional project team dedicated to the implementation of IFRS 17. This team has been engaged in determining accounting policies under the new standard, quantifying the transitional adjustments and developing and implementing a new system for calculating the contractual service margin together with a new accounting system which will support the extensive financial statements disclosures required by IFRS 17. The team is currently focussed on validating transition results, producing the 2022 year end results on an IFRS 17 basis, and the embedding of new IFRS 17 processes and controls across reporting, planning and relevant operational functions. Transition On the transition date, 1 January 2022, the Group will: • Identify, recognise, and measure each group of gross insurance contracts and associated reinsurance contracts, as if IFRS 17 had always applied unless impracticable; • Derecognise any existing IFRS 4 balances, including the Present Value of In Force Business and other relevant balances that would not exist had IFRS 17 always applied; • Classify reinsurance balances separately depending whether they are in an asset or liability position at a portfolio level, where previously they were classified at a treaty level; • Reclassify reinsurance deposits previously classified as financial instruments, to be included within the value of reinsurance contracts; and • Recognise any resulting net difference in accumulated profit net of any related tax adjustments.
137
Powered by FlippingBook