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Discussion Paper on Convergence to Ind AS in Insurance Sector
Ref. No: Date:07-12-2015
Discussion Paper on Convergence to Ind AS in Insurance Sector

In the Budget speech for Financial Year 2014-2015 on July 10, 2014 Honorable Finance Ministry indicated as under at para 128:

“There is an urgent need to converge the current Indian accounting standards with the International Financial Reporting Standards (IFRS). I propose for adoption of the new Indian Accounting Standards (Ind AS) by the Indian companies from the financial year 2015-16 voluntarily and from the financial year 2016-17 on a mandatory basis. Based on the international consensus, the regulators will separately notify the date of implementation of AS Ind for the Banks, Insurance companies etc. Standards for the computation of tax would be notified separately”.

The Standing Committee on Accounting Issues (SCAI) of the Authority has recommended draft of the Regulations on Financial Statements and Auditors’ Report which are compliant to Ind AS except as stated herein.

The following are some of the highlights of the draft:


1) Life Insurance business: Indian Accounting Standards [Ind AS] issued under the Companies (Indian Accounting Standards) Rules 2015 are applicable except:

(i) Indian Accounting Standard (Ind AS) 1- Presentation of Financial Statements shall apply except accounting for Other Comprehensive Income.
(ii) Indian Accounting Standard 7 (Ind AS 7) – Statement of Cash Flow – Cash Flow Statement shall be prepared only under the Direct Method.
(iii) Indian Accounting Standard (Ind AS 16) -Property, Plant & Equipment- shall apply except the use of revaluation model for subsequent measurement
(iv) Indian Accounting Standard (Ind AS 32) – Financial Instruments; Presentation shall not be applicable
(v) Indian Accounting Standard 40 (Ind AS 40) – Investment Property shall not be applicable in relation to investment property that belong to policyholders’ funds and in other cases fair value need not be disclosed.
(vi) Indian Accounting Standard (Ind AS 101) – First time adoption of Indian Accounting Standards shall not be applicable.
(vii) Indian Accounting Standard (Ind AS 104) – Insurance Contracts shall not be applicable.
(viii) Indian Accounting Standard (Ind AS 107) – Financial Instruments – Disclosures shall not be applicable
(ix) Indian Accounting Standard 108 (Ind AS 108) – Operating Segments – shall apply to all insurers irrespective of the meeting of the quantitative threshold and in particular in respect of  life, annuity and pension, health and unit Linked business, having regard to participating and non-participating policies
(x) Indian Accounting Standard 109 (Ind AS 109) – Financial instruments shall not be applicable except paragraphs relating to impairment.


2) Other than Life Insurance business: Indian Accounting Standards [Ind AS] issued under the Companies (Indian Accounting Standards) Rules 2015 are applicable except:

i. Indian Accounting Standard (Ind AS) 1- Presentation of Financial Statements shall apply except accounting for Other Comprehensive Income.
ii. Indian Accounting Standard 7 (Ind AS 7) – Statement of Cash Flow – Cash Flow Statement shall be prepared only under the Direct Method.
iii. Indian Accounting Standard (Ind AS 16) -Property, Plant & Equipment- shall apply except permitted use of revaluation model for subsequent measurement
iv. Indian Accounting Standard (Ind AS 32) – Financial Instruments; Presentation shall not be applicable
v. Indian Accounting Standard 40 (Ind AS 40) – Investment Property shall apply except disclosure of fair value
vi. Indian Accounting Standard (Ind AS 101) – First time adoption of Indian Accounting Standards shall not be applicable.
vii. Indian Accounting Standard (Ind AS 104) – Insurance Contracts shall not be applicable.
viii. Indian Accounting Standard (Ind AS 107) – Financial Instruments – Disclosures shall not be applicable
ix. Indian Accounting Standard 108 (Ind AS 108) – Operating Segments – shall apply to all insurers irrespective of the meeting of the quantitative threshold and in particular in respect of fire, marine cargo, marine Others, miscellaneous – motor own damage and motor third party, workmen’s compensation/employer’s liability, public/product liability, engineering, aviation, personal accident and others, health-benefit, indemnity, personal accident, travel [with further classified as individual and group] and reinsurance – segment wise as hereinbefore and life with its segments.
x. Indian Accounting Standard 109 (Ind AS 109) – Financial instruments shall not be applicable except paragraphs relating to impairment.

3) Allows revaluation of investment property acquired from policyholders funds only

4) Provide for enhanced disclosures

5) Extends the applicability of the Regulations on branch offices of foreign reinsurers

6) Presents ‘preference share capital’ under the Schedule ‘Borrowings’

The draft with the above is annexed herewith for the comments of all the stakeholders.  The date of applicability of this recommendations along with any other recommendations of the Implementation Group on Ind AS constituted vide IRDAI order reference IRDA/F&A/ORD/ACTS/201/11/2015 dated 17th November 2015 will be notified in due course.

The comments/suggestions may be forwarded to Mr. R K Sharma, Joint Director by e-mail at rksharma@irda.gov.in with a copy to Dr. Mamta Suri, HOD-F&A at mamta@irda.gov.in and Mr. Ammu Venkata Ramana, Deputy Director at  ammuvenkat@irda.gov.in and  Mrs. B.padmaja, Deputy Director at padmaja@irda.gov.in

 (V.R. Iyer)
Member (F&I)

 

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