In a significant move, the Ministry of Corporate Affairs (MCA) has decided to delay the implementation of the new accounting standard Ind AS 117 for the insurance sector. This decision offers insurance companies a breather, allowing them to continue using the previous standard, Ind AS 104, for preparing financial statements until further approval from the Insurance Regulatory and Development Authority of India (IRDAI). The MCA has amended the Companies (Indian Accounting Standards) Rules 2015 to reflect this change.
The postponement marks a shift from the earlier notification issued in August 2024, where Ind AS 117 was set to be implemented from April 1, 2024. This accounting standard was meant to align India’s insurance sector with global practices by adopting a principles-based approach similar to IFRS 17, currently used by over 140 countries. However, concerns from domestic insurance companies, particularly around revenue recognition, led to the rollback.
Ind AS 117 would have introduced new principles regarding how insurance contracts are accounted for, potentially requiring significant changes in actuarial valuations and financial reporting systems. Industry experts speculate that these complexities may have influenced the MCA’s decision to delay the rollout.
Amarjit Chopra, Past President of the Institute of Chartered Accountants of India (ICAI), commented on the situation, saying, “It is unfortunate that IRDAI has not yet decided on a clear roadmap for implementing Ind AS in insurance companies, even though these standards have been in place for years in India. The industry should be provided with a definitive timeline for the transition to Ind AS 117.”
The current situation leaves India’s insurance sector out of alignment with international standards. While many other regulators push for the adoption of global accounting and auditing practices, the insurance industry remains an exception.
Implications of the Rollback
With Ind AS 104 reinstated, the insurance sector remains non-converged with IFRS 17, which may be seen as a setback in terms of aligning India’s financial reporting standards with global practices. The August 2024 notification had initially moved India closer to compliance with international standards, but this delay postpones that progress.
Despite the relief provided by this delay, industry experts stress the importance of eventually transitioning to Ind AS 117 to ensure consistency and transparency in financial reporting. The lack of a clear implementation roadmap remains a concern for many within the sector.
