IFRS 17 is effective from accounting periods commencing on or after January 1, 2021
Insurance companies will have to prepare separate revenue accounts for sub-classes of businesses. A working group set up by the Insurance Regulatory and Development Authority of India (IRDAI) to device standard insurance contracts (equivalent to IFRS 17) has said that the accounts will have to be prepared separately for each line if business.
At present, revenues (premiums) are clubbed into one category in balance sheets.
Further, the percentage of business in rural and social sectors will also have to be disclosed. In case of general insurance, any segment that exceeds 10 percent of the miscellaneous business will also have to be disclosed separately.
IFRS 17 is a wholesome standard that deals with the recognition, measurement, presentation and disclosure requirements of insurance contracts. It applies to all entities that issue insurance contracts. IFRS 17 is effective from accounting periods commencing on or after January 1, 2021.
It requires a consistent accounting for all insurance contracts on a current measurement model and is expected to provide useful information about profitability of insurance contracts.
The working group has brought out draft norms on the preparation of financial statements under the new accounting regime. These norms will come into force with effect from accounting periods commencing on or after April 1, 2020.These norms require insurers to reveal more granular data on a periodic basis. For instance, in the general insurance segment, companies will have to give details about claims for up to 10 years. Similarly, life insurance companies will have to give details about the investment property. In terms of figures, all numbers in financial statements will have to be rounded off to the nearest lakh.