IRDAI postpones implementation Indian Accounting Standard for insurers indefinitely

The effective date of implementation shall be decided after the finalisation of IFRS 17 by IASB, said IRDAI.

 

Hyderarbad:

The Indian Insurance regulator IRDAI on Tuesday has decided to postpone the implementation of Indian Accounting Standard ( Ind-AS). which was supposed to start in 2020-21, indefinitely for the domestic insurance sector.Earlier,IRDAI’s in its circular dated June 28, 2017 had deferred the effective date of implementation of Ind AS in the domestic Insurance sector to FY 2020-21.

 

Ind-AS is the accounting standard adopted by companies including insurers in India and issued under the supervision of Accounting Standards Board (ASB) which was constituted as a body in the year 1977.Ministry of Corporate Affairs (MCA) spells out the accounting standards applicable for companies in India.

 

``it has been decided by the IRDAI in its meeting held on 20th December 2019, to implement Ind AS 109 and Ind AS equivalent of IFRS 17 simultaneously, along with all other applicable Ind AS,'' said Pravin Kutumbe, member((Finance and investment), IRDAi.

 

The effective date of implementation shall be decided after the finalisation of IFRS 17 by IASB, said IRDAI.

 

Accordingly, the circular dated 28th June 2017 hereby, stands withdrawn and the requirement of Proforma Ind AS financial statements being submitted on a quarterly basis as directed in the circular under reference stands dispensed with, added the IRDAI..

 

Explaining its decision , IRDAI has said while the insurance sector was preparing to implement the Ind AS, it was noted that the International Accounting Standards Board (IASB) has taken a considered view to amend IFRS 17: Insurance Contracts, due to the concerns raised around accounting treatments, operational complexity and implementation challenges raised by various stakeholders.

 

The IASB has indicated that they aim to issue the final amendments in mid-2020.

 

In the Indian context, the equivalent standard of IFRS 17 is yet to be notified. After the final standard (with amendments) is notified by IASB, the corresponding standard in India will have to be notified by the Ministry of Corporate Affairs (MCA).

 

Once the standard equivalent to IFRS 17 is notified in India, the IRDAI would be in a position to notify the regulations on preparation of Ind AS compliant financial statements. Several other Regulations that may be impacted due to the implementation of IFRS 17 may also have to be modified appropriately.

 

It is also noted that IFRS 4 shall be replaced by IFRS 17 once the final standard is effective.

 

Hence, implementing its equivalent (Ind AS 104) in the insurance sector in India at this juncture, would involve avoidable costs and efforts. It may therefore not be desirable to implement Ind AS 104 in the insurance sector as an interim measure.

 

Implementation of Ind AS 109 before implementation of equivalent of IFRS 17 equivalent may cause volatility in the financial statements because of asset liability mismatch.


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