The National Financial Reporting Authority (NFRA) had held a meeting to review the proposals from ICAI (Institute of Chartered Accountants of India). The meeting was about the new Standard, Ind AS 117, for accounting of insurance contracts.
NFRA will share its recommendations to Ministry of Corporate Affairs, after which the new standard has to be considered and notified by the Central Government under Companies Rules 2015. Once the government notifies the same, it will replace currently notified Ind AS 104, Insurance Contracts.
So lets try and understand more about the new standard for accounting of insurance contracts Ind AS 117as proposed by ICAI
What Is Ind AS 117?
Ind AS stands for Indian Accounting Standards and is formulated to keep the Indian legal and economic environment in check. This practice is to ensure that Indian practices are parallel to IFRS standards (International Financial Reporting Standard)
This standard is aimed to enhance the understanding and transparency of the insurance industry’s financial status. Ind As are numbered similarly to IFRS.
It is coordinated with the global IFRS 17 and will help improve insurance companies’ functionality, notify their current position, and help predict future capabilities.
Listed and unlisted companies with net worth between 250-500 crores are likely to follow Ind AS mandatorily or voluntarily. Ind AS 117 is likely to have a tremendous impact on the Indian insurance industry.
Key Features Of Ind AS 117
Transparency in insurance companies
Create unique insurance products
Better examination
Highlight the company's stance concerning accounting standards
What Is IFRS 17 Insurance Standard?
IFRS (International Financial Reporting Standards) are pre-set accounting standards that guide entities to record transactions and events in financial statements in the correct manner. These standards are universally applicable if the company follows IFRS.
IFRS 17 is one of the standard norms applicable on or before 1st January 2023 and includes the following features:
Highlights insurance firm outcomes separately from insurance finance expenditure and income
Integrate existing future cash flow with the estimated profit ratio over the contract tenure
The need for an entity to design an accounting policy that considers insurance finance expenses and incomes, and other incomes
How Does Ind AS 117 Benefit India Globally?
NFRA Chairperson, Dr Ajay Pandey noted that Ind AS 117 is an Indian version of IFRS 17. Over 140 countries have adopted IFRS 17 and with Ind AS 117, India can follow these international best practices.
This means that Indian companies can embrace the same level of functionality and norms as other international companies. Indian insurance firms can represent globally comparable financial data, venture into lucrative investments, and surge insurance penetration in the nation.
The adoption of Ind AS 117 indicates India’s dedication to strengthening the insurance vertical’s financial reporting standards. Alongside this, industry pioneers adhere to the best international practices.
With the assistance of ICAI, NFRA, and other stakeholders, Ind AS 117 can empower the Indian insurance industry to match global competitiveness in all aspects.
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