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With an aim to align Indian Accounting Standards (Ind AS) with International Financial Reporting Standards (IFRS), the Ministry of Corporate Affairs (MCA) issued a notification on 12 August 2024, introducing significant amendments to the Companies (Indian Accounting Standards) Rules, 2015 (the amendments). Through the amendments, MCA introduced Ind AS 117, Insurance Contracts for accounting of insurance contracts and replaces current standard Ind AS 104, Insurance Contracts.

Ind AS 117 sets out detailed guidelines for the recognition, measurement, presentation, and disclosure of insurance contracts. Additionally, amendments have been made to Ind AS 101, First-time Adoption of Indian Accounting Standards, Ind AS 103, Business Combinations, Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations, Ind AS 107, Financial Instruments: Disclosures, Ind AS 109, Financial Instruments and Ind AS 115, Revenue from Contracts with Customers to align them with Ind AS 117. The amendments also introduce enhanced disclosure requirements, particularly in Ind AS 107, enhance the clarity regarding financial instruments associated with insurance contracts.

Effective date: Ind AS 117 is effective from 1 April 2024.

To access the text of the amendments, please click here

Action points for auditors

  • It is to be noted that currently, the Insurance Regulatory Development Authority of India (IRDA) has not made Ind AS applicable for insurance companies, accordingly, while filing statutory books of account, insurance companies would need to continue to report under the existing accounting standards. However, insurance companies that are a part of a wider group, with the ultimate holding company preparing accounts in accordance with Ind AS, will now be required to comply with Ind AS 117 while preparing accounts for consolidation.
  • Given that the amendments are effective from the date of their notification in the official gazette (i.e. 12 August 2024). However, Ind AS 117 is applicable from 1 April 2024, the transitional impacts of adoption of Ind AS 117 would need to be considered and discussed with insurance companies.
  • It is to be noted that Ind AS 117 would also have implications for non-insurers, as the scope of an ‘insurance contract’ is wide. Accordingly, auditors would need to analyse, discuss with the companies and determine which contracts would fall under the purview of Ind AS 117. Some contracts or components which could fall under the purview of insurance contracts or insurance components include various types of guarantees, credit cards, lease contracts, boiler breakdown contracts, loans (like loans with death waivers), phone repair contracts, product and extended warranties, etc.

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