In a huge relief for insurance companies, the Corporate Affairs Ministry (MCA) has put in abeyance implementation of a key accounting standard (Ind AS 117) for insurance sector that had aligned India with global practices with effect from April 1,2024. 

MCA has now notified that insurance companies can provide its financial statements as per Ind AS104 for the purpose of consolidated financial statements by its parent or investor or venturer till the time insurance regulator IRDAI notifies Ind AS 117. For this purpose, MCA has amended its Companies (Indian Accounting Standards) Rules 2015. 

This, in effect, brings back for the insurance sector an accounting framework that was done away with two months back. 

IndAS 117 had introduced a principles based approach, which may not have found favour with domestic insurance companies as it impinged on revenue recognition, industry observers said. 

Story so far

The MCA had, in August, notified the much-awaited new accounting standard on ‘Insurance Contracts’ (Ind AS 117), setting the stage for a major overhaul of accounting practices in the insurance industry.

The new Accounting Standard (Ind AS 117), which was made applicable from April 1, 2024, substantially converged with the IFRS 17, which is now being adopted by over 140 countries since January 1, 2023. The MCA move of August 2024 had brought Indian accounting standards closer to global standards as regards the insurance sector. 

The August 2024 notification of Ind AS 117 was based on the recommendations of the National Financial Reporting Authority (NFRA), which is the country’s sole independent audit regulator. The latest Ind AS 117 had then replaced the currently notified Ind AS 104, insurance contracts. However, now IndAS 104 is back with MCA on September 28 again notifying it. 

Non-Convergence 

Experts now see the latest MCA rollback as a setback for India as its insurance sector will now be non-converged with IFRS-17, which is currently being implemented in over 140 countries. 

Amarjit Chopra, Past President, Institute of Chartered Accountants of India (ICAI) said “It is unfortunate that IRDAI has not been able to decide the roadmap for implementation of IndAS in insurance companies ever since IndAS were implemented in the country”

As regards deferment of Ind As 117 one can well appreciate the difficulties in implementation of Ind AS117 due to various reasons, particularly lot of valuations to be done by Actuaries and also the systems may require substantial changes to incorporate requirements of Ind As 117, he said. 

But it is imperative that industry must be given a date by the regulator from which the IndAS117 will be implemented, he said. 

“To me it is surprising that in various other auditing and accounting matters various regulators keep on insisting on need for international standards to be implemented. But with respect to insurance companies, the it takes a backseat”, Chopra told businessline.

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