IRDAI has deferred the implementation of Indian Accounting Standards (IndAS) by insurance companies till 2020-21.
Rule 4 of the Companies (Indian Accounting Standards) (Amendment) Rules 2016 states that “the Banking Companies and Insurance Companies shall apply the IndAS as notified by the Reserve Bank of India (RBI) and Insurance Regulatory Development Authority (IRDA), respectively.”
Insurers have been given more time because of mismatch in valuations. Even as IndAS is about to be adopted, the International Accounting Standards Board in May 2017 issued the much-awaited IFRS 17 Insurance Contracts that replaces IFRS 4, which was brought in as an interim standard.
As IFRS 4 has allowed companies to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches, it is difficult for stakeholders to compare the financial performance of otherwise similar companies.
In a recent meeting, the IRDAI board took note of the ‘peculiarities’ of the insurance sector in India, particularly the fact that India does not have a standard equivalent to IAS 39 on Financial Instruments: Recognition and Measurement.
“The implementation of the IndAS in the present form will lead to a position where assets will be valued on fair-value/ market-value basis and liabilities will continue to be valued as per the existing formula-based approach,” the authority said in an order sent to the insurers.
Further, compliance costs would be doubled, once immediately on implementation of IndAS and secondly when IFRS 17 is implemented in India.
So, insurers can now breathe easy with regard to IndAS and prepare for its launch in two years from now.
IndAS governs the accounting and recording of financial transactions as well as the presentation of statements such as profit and loss account and balance sheet of a company.
