The National Financial Reporting Authority (NFRA), which is country’s sole independent audit regulator, has examined the proposals received from the CA Institute on the proposed new accounting standard for insurance contracts (Ind AS 117).
The meeting to examine the new accounting standard was attended by the executive body of NFRA and part time-members of the authority from MCA, CAG, ICAI and the accountancy profession.
NFRA will share its recommendations to Ministry of Corporate Affairs (MCA), after which Ind AS 117 has to be considered and notified by the Central government. When notified, it will replace currently notified Ind AS 104, insurance contracts.
NFRA Chairman Ajay Bhushan Pandey highlighted that Ind AS 117 is substantially converged with IFRS Standard adopted in over 140 countries.
ICAI had also undertaken extensive public consultation by issuing exposure drafts of the proposed Ind AS 117 in 2018, 2021 and 2022.
IFRS 17
IFRS 17, originally issued by the International Accounting Standards Board (IASB), in May 2017, is a complete overhaul of the accounting for the insurance industry.
It is considered as a first truly international IFRS standard for insurance contracts to help investors and other users to better understand insurers’ risk exposure, profitability and financial position. Globally, it has become effective from January 1, 2023.
IFRS 17 is specifically designed to capture the unique features of the insurance and investment contracts of the insurance entities. It is highly insurance products specific and would entail a paradigm shift in the measurement, presentation and disclosure requirements.
Insurance industry fulfils a significant role in the global economy. IASB’s factsheet of 2017 says with $13 trillion in assets, insurers account for 12 per cent of the total assets of listed companies that use IFRS standards.
Given the central economic role of the industry, proper and transparent accounting for insurance contracts is of crucial importance.