INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
The Authority, in order to prepare the insurance industry for Implementation of Ind AS and to provide suitable guidelines wherever required, had constituted an Implementation Group vide Order reference no. IRDA/ F&A/ ORD /ACTS /201/11/2015 dated 17th November 2015. The Implementation Group had submitted their Report on 29thDecember 2016. The draft of the Regulations recommended by the Implementation Group were issued as Exposure draft for comments from all stakeholders. Simultaneously, insurance companies have also been directed to submit Proforma Reports effective quarter ending December 2016.
2. Further, in the press release dated 18th January 2016 the Ministry of Corporate Affairs (MCA) have laid down the roadmap for implementation of Ind AS for the insurance sector whereby, insurers/insurance companies are required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards with one year comparatives. Rule 4 of the Companies (Indian Accounting Standards) (Amendment) Rules, 2016 further states that “The Banking Companies and Insurance Companies shall apply the Ind AS as notified by the Reserve Bank of India (RBI) and Insurance Regulatory Development Authority (IRDA) respectively”.
3. In the meantime, the International Accounting Standards Board on 18th May 2017 issued the much awaited IFRS 17 Insurance Contracts which replaces IFRS 4, which was brought in as an interim Standard. As the IFRS 4 has given companies dispensation to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches, it is difficult for stakeholders to compare the financial performance of otherwise similar companies. The developments around release of IFRS 17 have resulted in the IRDAI reviewing the position in the matter of Implementation of Ind AS in the insurance sector in India.
4. The Board of the Authority at its meeting held on 31st May 2017 noted the peculiarities of the insurance sector in India, particularly the fact that India does not have a standard equivalent to IAS 39 on Financial Instruments: Recognition and Measurement. The Implementation of the Ind AS in the present form will lead to a position where assets will be valued on fair value / market value basis and liabilities will continue to be valued as per the existing formula based approach. This is likely to lead to mismatch in the asset and liability valuation and also cause volatility in the financial statements of the insurance companies. Further, compliance costs would be incurred twice, once immediately on implementation of Ind AS and secondly when IFRS 17 is implemented in India.
5. The Authority therefore, approved the Regulatory override whereby the implementation of Ind AS in the Insurance Sector in India has been deferred for a period of two years and the same shall now be implemented effective 2020-21.
6. However, the requirement of submitting Proforma Ind AS financial statements on a quarterly basis shall continue to be governed as directed under IRDAI circular reference IRDA/F&A/CIR/ACTS/ 262/12/2016 dated 30thDecember 2016.
(In-charge of Finance & Accounts)