‘Really epic’: A major accounting change is coming for lifecos — here’s why it matters
BNN Bloomberg
Rarely does something earth shattering happen in the accounting world, but there’s a much-anticipated change coming that may alleviate headaches for investors when assessing the financials of Canada’s big life insurance companies.
Effective Jan. 1, 2023, Sun Life Financial Inc., Manulife Financial Corp., and Great-West Lifeco Inc. will be subject to a new International Financial Reporting Standard for insurance contract accounting (IFRS 17).
The transition to IFRS 17 is expected to materially reduce the Canadian lifecos’ book value of equity, moderately lowering underlying net income compared to previous years. Sun Life shares took the biggest hit following an investor education session on May 31, when that company estimated the accounting change will reduce shareholders’ equity by 15 to 20 per cent — a larger hit than analysts expected.
“Anytime you have this uncertainty in the marketplace, there’s always concern especially in the near term,” said Scott Chan, managing director of equity research in financials with Canaccord Genuity Corp., in a phone interview.
