The Insurance Regulatory and Development Authority of India (IRDA) through its order dated 17 November 2015 stated that the insurance sector in India would be converging with IFRS after the issuance of the revised standard on insurance contracts i.e. IFRS 4, Insurance Contracts by the International Accounting Standards Board (IASB).
The Insurance Regulatory and Development Authority of India (IRDA) through its order dated 17 November 2015 stated that the insurance sector in India would be converging with IFRS after the issuance of the revised standard on insurance contracts i.e. IFRS 4, Insurance Contracts by the International Accounting Standards Board (IASB). Currently, IFRS 4 is being deliberated by the IASB and a final standard is expected to be issued in 2016. The IASB expects to allow an implementation period of approximately three years after the publication of the new insurance contracts standard. Additionally, for entities whose predominant activity is issuing contracts within the scope of IFRS 4, IASB is evaluating a proposal to allow an optional temporary exemption from applying IFRS 9, Financial Instruments (effective date 1 January 2018).
In order to prepare the Indian insurance sector towards convergence with Ind AS, IRDA has constituted an implementation group to lay down the road map for convergence.
IRDA on 7 December 2015 issued a Discussion Paper (DP) on the convergence to Ind AS in the insurance sector. The Standing Committee on Accounting Issues (SCAI) of the IRDA has recommended a draft of the regulations on financial statements and auditors’ report which are
compliant to Ind AS. The DP is open for comments.
Key highlights of the draft are as follows:
The date of applicability of these recommendations along with any other recommendations of the implementation group on Ind AS would be notified in due course of time.
In our opinion, IRDA has taken a step in the right direction by forming a focus group to examine the implications of implementing Ind AS in the Indian insurance sector. Based on the comments received by various stakeholders, IRDA is expected to finalise the regulations on financial statements and auditor’s report which are expected to be compliant to Ind AS.
Additionally, insurance companies should start identifying the implementation issues on the necessary changes on account of a transition to Ind AS, including IT system and legislative change requirements. IRDA should also develop educational material for smooth implementation of the same.
We encourage stakeholders to actively participate and provide their comments and implementation issues on the draft regulations so as to help ensure smooth transition to Ind AS in the insurance sector.
To access the text of the DP issued by the IRDA, please click here.
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