The Ministry of Corporate Affairs (MCA) had notified the Companies (Indian Accounting Standards) Rules, 2015 on 16 February 2015. Through its press release dated 18 January 2016, MCA outlined the road map for implementation of Indian Accounting Standards (Ind AS) by banks, non-banking financial companies, select all India term lending and refinancing institutions and insurers/insurance companies, making Ind AS applicable to the entities from 1 April 2018.
The Ministry of Corporate Affairs (MCA) had notified the Companies (Indian Accounting Standards) Rules, 2015 on 16 February 20151. Through its press release dated 18 January 2016, MCA outlined the road map for implementation of Indian Accounting Standards (Ind AS) by banks, non-banking financial companies, select all India term lending and refinancing institutions and insurers/insurance companies, making Ind AS applicable to the entities from 1 April 2018.
On 18 May 2017, the International Accounting Standards Board (IASB) issued the much-awaited comprehensive international standard on insurance, i.e. IFRS 172, Insurance Contacts, which replaced IFRS 4. The release of IFRS 17 led IRDAI to review its position in the matter of implementation of Ind AS in the insurance sector, considering the following:
Due to the above facts, IRDAI deferred the implementation of Ind AS in the insurance sector in India for a period of two years upto 1 April 20203. However, insurance companies are required to submit proforma Ind AS financial statements to IRDAI on a quarterly basis effective 31 December 20164.
Internationally, IASB considered the concerns around accounting treatments, operational complexity and implementation challenges raised by stakeholders, and proposed certain amendments to IFRS 17. The IASB has indicated that they aim to issue the final amendments to the standard in mid 2020.
In India, Ind AS 117 (converged with IFRS 17) is still at an exposure draft stage, and will be updated based on the amendments made to IFRS 17. Once Ind AS 117 is notified in India by MCA, IRDAI would be in a position to notify the regulation on preparation of Ind AS compliant financial statements and modify other regulations that may be impacted due to the implementation of Ind AS 117.
Considering the costs and efforts involved and the asset liability mismatch (as mentioned in the background section) on implementation of Ind AS at this juncture, IRDAI in its meeting held on 20 December 2019 decided to implement Ind AS 109, Financial Instruments and Ind AS 117 simultaneously, along with other applicable Ind AS. However, the effective date of implementation would be decided after the finalisation of IFRS 17 by IASB.
Accordingly, the circular dated 28 June 2017 has been withdrawn along with the requirement of proforma Ind AS financial statements being submitted on a quarterly basis as directed in the circular.
1 The Ind AS notified on 16 February 2015 included Ind AS 104, Insurance Contracts (converged with IFRS 4, Insurance Contracts) which was in the nature of an interim standard pending the completion of the project on insurance contracts by IASB.
2 Internationally, IFRS 17 is applicable from 1 January 2021. In India, the Institute of Chartered Accountants of India (ICAI) issued an exposure draft of Ind AS 117, Insurance Contracts, which is consistent with IFRS 17. Ind AS 117 is yet to be notified by MCA.
3 The deferment was communicated vide circular no. IRDA/F&A/CIR/ACTS/146/06/2017 date 28 June 2017.
4 As required by IRDAI circular no. IRDA/F&A/CIR/ACTS/262/12/2016 dated 30 December 2016.
To access the text of the IRDAI circular, please click here.
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