The insurance regulator, IRDAI has said that the insurers have comply with the new Indian Accounting Standards (Ind AS) for preparing their financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018.
The Ministry of Corporate Affairs (MCA), Government of India has notified the Companies (Indian Accounting Standards) Rules, 2015 on February 16, 2015 that have to be complied by the insurers, said TS Vijyan, chairman, IRDAI in a note to the insurers on Tuesday.
According to the analysts, the basic objective of Accounting Standards is to remove variations in the treatment of several accounting aspects and to bring about standardization in presentation. They intent to harmonize the diverse accounting policies followed in the preparation and presentation of financial statements by different reporting enterprises so as to facilitate intra-firm and inter-firm comparison.
Ind AS shall be applicable to both standalone financial statements and consolidated financial statements. Insurers shall apply Ind AS only as per the above timelines and shall not be permitted to adopt Ind AS earlier, said the note.
Insurers also need to be in preparedness to submit proforma Ind AS financial statements to the Authority from the quarter ended December 31, 2016, onwards, added the note.
The IRDAI will also take steps to facilitate the implementation process. To begin with, from July 2016, it will hold periodic meetings with insurers in this regard.
Ind AS implementation is likely to significantly impact the financial reporting systems and processes and, as such, these changes need to be planned, managed, tested and executed in advance of the implementation date. Insurers are advised to set up a steering committee headed by an official of the rank of an executive director (or equivalent) comprising members from cross-functionalareas of the insurer to immediately initiate the implementation process.
The critical issues which need to be factored in the Ind AS implementation plan include the following:
(i) Ind AS Technical Requirements: Diagnostic analysis of differences between the current accounting framework and Ind AS, significant accounting policy decisions impacting financials, drafting accounting policies, preparation of disclosures, documentation, preparation of proforma Ind AS financial statements, timing the changeover to Ind AS, and dry-run of accounting systems and end-to-end reporting process before the actual conversion.
(ii) Systems and processes: Evaluate system changes – assessment of processes requiring changes, issues having significant impact on information systems (including IT systems), and develop/strengthen data capture system, where required.
(iii)Business Impact: Profit planning and budgeting, taxation, capital planning, and impact on solvency.
(iv) People – Evaluation of resources: Adequate and fully dedicated internal staff for implementation, comprehensive training strategy and program.
(v) Project management: Managing the entire process-holistic approach to planning and execution by ensuring that all linkages are established between accounting,systems, people and business, besides effective communication strategies to stakeholders.
Source: Asia Insurance Post
Date: 2nd March, 2016.