MCA withdraws IND AS 117 for Insurance Contracts [Read Notification]
This amendment has important implications for insurance companies in India
MCA – Indian Accounting Standards – Ministry of Corporate Affairs – Insurance Contracts – IND AS 117 – taxscan
MCA – Indian Accounting Standards – Ministry of Corporate Affairs – Insurance Contracts – IND AS 117 – taxscan
The Ministry of Corporate Affairs ( MCA ) has recently notified the Companies ( Indian Accounting Standards ) Third Amendment Rules, 2024, which includes a significant update related to Indian Accounting Standard ( IND AS ) 117 for insurance contracts.
The key amendment allows insurance companies to continue applying IND AS 104 for their financial reporting purposes until IND AS 117 is formally notified by the Insurance Regulatory and Development Authority of India ( IRDAI ). Once notified, IND AS 117 will replace IND AS 104, which has been in use until now.
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The proviso was inserted as follows, “Provided that an insurer or insurance company may provide its financial statement as per Ind AS 104 for the purposes of consolidated financial statements by its parent or investor or venturer till the Insurance Regulatory and Development Authority notifies the Ind AS 117 and for this purpose, Ind AS 104 shall, as specified in the Schedule to these rules, continue to apply.”
This shift is expected to improve the accounting and financial reporting of insurance contracts by bringing more transparency and consistency in recognizing liabilities and future cash flows related to insurance contracts.
The objective of this Indian Accounting Standard ( Ind AS ) is to specify the financial reporting for insurance contracts by any entity that issues such contracts ( described in this Ind AS as an insurer ).
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In particular, this Ind AS requires:
(a) limited improvements to accounting by insurers for insurance contracts.
(b) disclosure that identifies and explains the amounts in an insurer‘s financial statements arising from insurance contracts and helps users of those financial statements understand the amount, timing and uncertainty of future cash flows from insurance contracts.
Under the amended rules, insurance companies can continue using IND AS 104 for consolidation with financial statements of their parent or holding companies until IND AS 117 is implemented.
This extension provides relief to the insurance sector, allowing time to transition smoothly to the new standards.
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The adoption of IND AS 117 is expected to align India's financial reporting with global standards, ensuring better comparability and providing users of financial statements with a clearer understanding of the financial position and performance of companies engaged in insurance activities.
To Read the full text of the Notification CLICK HERE
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