TaxTMI 
TaxTMI 
Companies (Indian Accounting Standards) Amendment Rules, 2024.
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....raph D4 and paragraph D4, and after paragraph B12 added a heading and paragraph B13. An entity shall apply those amendments when it applies Ind AS 117." (ii) in Appendix B, -- (a) in paragraph B1, for item (h), the following item shall be substituted, namely: -- "(h) insurance contracts (paragraph B13); and" (b) for paragraph B13, the following paragraph shall be substituted, namely: -- "Insurance contracts B13 An entity shall apply the transition provisions in paragraphs C1-C24 and C28 in Appendix C of Ind AS 117 to contracts within the scope of Ind AS 117. The references in those paragraphs in Ind AS 117 to the transition date shall be read as the date of transition to Ind ASs." (iii) in Appendix D, -- (a) in paragraph D1, item (b) shall be omitted; (b) paragraph D4 along with its heading shall be omitted. (iv) in Appendix 1, -- (a) for paragraph 12, following paragraph shall be substituted, namely: -- "12. The following paragraph numbers appear as 'deleted' in IFRS 1. In order to maintain consistency with paragraph numbers of IFRS 1, the paragraph numbers are retained in Ind AS 101: (i) Paragraph 19 (ii) Paragraph D1(b) (iii) Paragraph D1(e) (....
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.... with paragraphs 39 and B93-B95F of Ind AS 117, at the acquisition date." (v) for paragraph 35, the following paragraph shall be substituted, namely: -- "35. A bargain purchase might happen, for example, in a business combination that is a forced sale in which the seller is acting under compulsion. However, the recognition or measurement exceptions for particular items discussed in paragraphs 22-31A may also result in recognizing a gain (or change the amount of a recognised gain) on a bargain purchase." (vi) for paragraph 64N, the following paragraph shall be substituted, namely: -- "64N. Ind AS 117 amended paragraphs 17, 20, 21, 35 and B63, and after paragraph 31 added a heading and paragraph 31A. An entity shall apply the amendments to paragraph 17 to business combinations with an acquisition date after the date of initial application of Ind AS 117. An entity shall apply the other amendments when it applies Ind AS 117." (vii) in Appendix B, in paragraph B63, for item (b), the following item shall be substituted, namely, -- "(b) (Refer Appendix 1)" (viii) in Appendix 1, -- (a) for paragraph 5, the following paragraph shall be substituted, namely: -- "5. Paragraph....
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....s with discretionary participation features within the scope of Ind AS 117. However, this Ind AS applies to: (i) derivatives that are embedded in contracts within the scope of Ind AS 117, if Ind AS 109 requires the entity to account for them separately. (ii) investment components that are separated from contracts within the scope of Ind AS 117, if Ind AS 117 requires such separation, unless the separated investment component is an investment contract with discretionary participation features. (iii) an issuer's rights and obligations arising under insurance contracts that meet the definition of financial guarantee contracts, if the issuer applies Ind AS 109 in recognising and measuring the contracts. However, the issuer shall apply Ind AS 117 if the issuer elects, in accordance with paragraph 7(e) of Ind AS 117, to apply Ind AS 117 in recognising and measuring the contracts. (iv) an entity's rights and obligations that are financial instruments arising under credit card contracts, or similar contracts that provide credit or payment arrangements, that an entity issues that meet the definition of an insurance contract if the entity applies Ind AS 109 to those rights and oblig....
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....dian context. Paragraphs 43-44BB related to effective date and transition given in IFRS 7 have not been given in Ind AS 107 since it is not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IFRS 7, these paragraph numbers are retained in Ind AS 107". (F) in "Indian Accounting Standard (Ind AS) 109", -- (i) in paragraph 2.1, for item (e), the following item shall be substituted, namely: -- "(e) rights and obligations arising under an insurance contract as defined in Ind AS 117, Insurance Contracts, or an investment contract with discretionary participation features within the scope of Ind AS 117. However, this Standard applies to: (i) derivatives that are embedded in contracts within the scope of Ind AS 117, if the derivatives are not themselves contracts within the scope of Ind AS 117. (ii) investment components that are separated from contracts within the scope of Ind AS 117, if Ind AS 117 requires such separation, unless the separated investment component is an investment contract with discretionary participation features within the scope of Ind AS 117. (iii) an issuer's rights and obligations under insurance contracts t....
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....that instrument as a financial liability and to account for the repurchased instrument as if the instrument were a financial asset, and measure it at fair value through profit or loss in accordance with this Standard. That election is irrevocable and made on an instrument-by-instrument basis. For the purposes of this election, insurance contracts include investment contracts with discretionary participation features. (See Ind AS 117 for terms used in this paragraph that are defined in that Standard.)" (iii) for paragraph 7.1.6, the following paragraph shall be substituted, namely: -- "7.1.6 Ind AS 117 amended paragraphs 2.1, B2.1, B2.4, B2.5 and B4.1.30, and added paragraphs 3.3.5, 7.2.36-7.2.42. An entity shall apply those amendments when it applies Ind AS 117." (iv) for paragraphs 7.2.36-7.2.42, the following paragraphs shall be substituted, namely:-- "Transition for Ind AS 117 7.2.36 An entity shall apply the amendments to Ind AS 109 made by Ind AS 117 retrospectively in accordance with Ind AS 8, except as specified in paragraphs 7.2.37-7.2.42. 7.2.37 An entity that first applies Ind AS 117 at the same time it first applies this Standard shall apply paragraphs 7.2.1....
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.... information required by paragraph 28(f) of Ind AS 8. 7.2.42 In the reporting period that includes the date of initial application of these amendments, the entity shall disclose the following information as at that date of initial application for each class of financial assets and financial liabilities that was affected by these amendments: (a) the previous classification, including the previous measurement category when applicable, and carrying amount determined immediately before applying these amendments; (b) the new measurement category and carrying amount determined after applying these amendments; (c) the carrying amount of any financial liabilities in the balance sheet that were previously designated as measured at fair value through profit or loss but are no longer so designated; and (d) the reasons for any designation or de-designation of financial liabilities as measured at fair value through profit or loss." (v) in Appendix B, in paragraphs B2.1 and B2.4, for the words and figures "Ind AS 104", the words and figures "Ind AS 117" shall be substituted. (vi) in paragraph B2.5, for items (a) and (b), the following items shall be substituted, namely: -- "(a) A....
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....viii) in Appendix 1, -- (a) for paragraph 3, the following paragraph shall be substituted, namely: -- "3. Paragraphs 7.1.1 to 7.1.3 of IFRS 9 related to effective date have not been included in Ind AS 109 as these paragraphs are not relevant in Indian context. Paragraph 7.1.9 has not been included as it refers to amendments to paragraph B3.3.6 of IFRS 9, for which corresponding amendments to Ind AS 109 are under formulation. However, in order to maintain consistency with paragraph numbers of IFRS 9, these paragraph numbers are retained in Ind AS 109." (b) paragraph 5 shall be omitted. (G) in "Indian Accounting Standard (Ind AS) 115", (i) in paragraph 5, for item (b), the following shall be substituted, namely:- "(b) contracts within the scope of Ind AS 117, Insurance Contracts. However, an entity may choose to apply this Standard to insurance contracts that have as their primary purpose the provision of services for a fixed fee in accordance with paragraph 8 of Ind AS 117;" (ii) in Appendix C, after paragraph C1B, the following shall be inserted, namely:- "C1C Ind AS 117 amended paragraph 5. An entity shall apply that amendment when it applies Ind AS 117". (H) afte....
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....tionary participation features as set out in paragraph 3(c), except for the reference to insurance contracts in paragraph 3(c) and as described in paragraph 71. 5. All references in Ind AS 117 to insurance contracts issued also apply to insurance contracts acquired by the entity in a transfer of insurance contracts or a business combination other than reinsurance contracts held. 6. Appendix A defines an insurance contract and paragraphs B2-B30 of Appendix B provide guidance on the definition of an insurance contract. 7. An entity shall not apply Ind AS 117 to: (a) warranties provided by a manufacturer, dealer or retailer in connection with the sale of its goods or services to a customer (see Ind AS 115, Revenue from Contracts with Customers). (b) employers' assets and liabilities from employee benefit plans (see Ind AS 19, Employee Benefits and Ind AS 102, Share-based Payment) and retirement benefit obligations reported by defined benefit retirement plans. (c) contractual rights or contractual obligations contingent on the future use of, or the right to use, a non-financial item (for example, some licence fees, royalties, variable and other contingent lease payments and....
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....ntract arises primarily from the customer's use of services rather than from uncertainty over the cost of those services. 8A Some contracts meet the definition of an insurance contract but limit the compensation for insured events to the amount otherwise required to settle the policyholder's obligation created by the contract (for example, loans with death waivers). An entity shall choose to apply either Ind AS 117 or Ind AS 109 to such contracts that it issues unless such contracts are excluded from the scope of Ind AS 117 by paragraph 7. The entity shall make that choice for each portfolio of insurance contracts, and the choice for each portfolio is irrevocable. Combination of insurance contracts 9. A set or series of insurance contracts with the same or a related counterparty may achieve, or be designed to achieve, an overall commercial effect. In order to report the substance of such contracts, it may be necessary to treat the set or series of contracts as a whole. For example, if the rights or obligations in one contract do nothing other than entirely negate the rights or obligations in another contract entered into at the same time with the same counterparty, the c....
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....reafter, all references in Ind AS 117 to embedded derivatives refer to derivatives that have not been separated from the host insurance contract and all references to investment components refer to investment components that have not been separated from the host insurance contract (except those references in paragraphs B31-B32). Level of aggregation of insurance contracts 14. An entity shall identify portfolios of insurance contracts. A portfolio comprises contracts subject to similar risks and managed together. Contracts within a product line would be expected to have similar risks and hence would be expected to be in the same portfolio if they are managed together. Contracts in different product lines (for example single premium fixed annuities compared with regular term life assurance) would not be expected to have similar risks and hence would be expected to be in different portfolios. 15. Paragraphs 16-24 apply to insurance contracts issued. The requirements for the level of aggregation of reinsurance contracts held are set out in paragraph 61. 16. An entity shall divide a portfolio of insurance contracts issued into a minimum of: (a) a group of contracts that ar....
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....lio would fall into different groups only because law or regulation specifically constrains the entity's practical ability to set a different price or level of benefits for policyholders with different characteristics, the entity may include those contracts in the same group. The entity shall not apply this paragraph by analogy to other items. 21. An entity is permitted to subdivide the groups described in paragraph 16. For example, an entity may choose to divide the portfolios into: (a) more groups that are not onerous at initial recognition--if the entity's internal reporting provides information that distinguishes: (i) different levels of profitability; or (ii) different possibilities of contracts becoming onerous after initial recognition; and (b) more than one group of contracts that are onerous at initial recognition--if the entity's internal reporting provides information at a more detailed level about the extent to which the contracts are onerous. 22. An entity shall not include contracts issued more than one year apart in the same group. To achieve this the entity shall, if necessary, further divide the groups described in paragraphs 16-21. 23. A group of in....
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....tracts are added to the group. Insurance acquisition cash flows (paragraphs B35A‒ B35D) 28A An entity shall allocate insurance acquisition cash flows to groups of insurance contracts using a systematic and rational method applying paragraphs B35A‒ B35B, unless it chooses to recognise them as expenses applying paragraph 59(a). 28B An entity not applying paragraph 59(a) shall recognise as an asset insurance acquisition cash flows paid (or insurance acquisition cash flows for which a liability has been recognised applying another Ind AS) before the related group of insurance contracts is recognised. An entity shall recognise such an asset for each related group of insurance contracts. 28C An entity shall derecognise an asset for insurance acquisition cash flows when the insurance acquisition cash flows are included in the measurement of the related group of insurance contracts applying paragraph 38(c)(i) or paragraph 55(a)(iii). 28D If paragraph 28 applies, an entity shall apply paragraphs 28B‒28C in accordance with paragraph B35C. 28E At the end of each reporting period, an entity shall assess the recoverability of an asset for insurance acquisition cas....
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....ancial risk (paragraph 37). (b) the contractual service margin, measured applying paragraphs 38-39. Estimates of future cash flows (paragraphs B36-B71) 33. An entity shall include in the measurement of a group of insurance contracts all the future cash flows within the boundary of each contract in the group (see paragraph 34). Applying paragraph 24, an entity may estimate the future cash flows at a higher level of aggregation and then allocate the resulting fulfilment cash flows to individual groups of contracts. The estimates of future cash flows shall: (a) incorporate, in an unbiased way, all reasonable and supportable information available without undue cost or effort about the amount, timing and uncertainty of those future cash flows (see paragraphs B37- B41). To do this, an entity shall estimate the expected value (ie the probability-weighted mean) of the full range of possible outcomes. (b) reflect the perspective of the entity, provided that the estimates of any relevant market variables are consistent with observable market prices for those variables (see paragraphs B42-B53). (c) be current--the estimates shall reflect conditions existing at the measurement d....
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....racteristics are consistent with those of the insurance contracts, in terms of, for example, timing, currency and liquidity; and (c) exclude the effect of factors that influence such observable market prices but do not affect the future cash flows of the insurance contracts. Risk adjustment for non-financial risk (paragraphs B86-B92) 37. An entity shall adjust the estimate of the present value of the future cash flows to reflect the compensation that the entity requires for bearing the uncertainty about the amount and timing of the cash flows that arises from non-financial risk. Contractual service margin 38. The contractual service margin is a component of the asset or liability for the group of insurance contracts that represents the unearned profit the entity will recognise as it provides insurance contract services in the future. An entity shall measure the contractual service margin on initial recognition of a group of insurance contracts at an amount that, unless paragraph 47 (on onerous contracts) or paragraph B123A (on insurance revenue relating to paragraph 38(c)(ii)) applies, results in no income or expenses arising from: (a) the initial recognition of a....
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....ime value of money and the effect of financial risk as specified in paragraph 87. Contractual service margin (paragraphs B96--B119B) 43. The contractual service margin at the end of the reporting period represents the profit in the group of insurance contracts that has not yet been recognised in profit or loss because it relates to the future service to be provided under the contracts in the group. 44. For insurance contracts without direct participation features, the carrying amount of the contractual service margin of a group of contracts at the end of the reporting period equals the carrying amount at the start of the reporting period adjusted for: (a) the effect of any new contracts added to the group (see paragraph 28); (b) interest accreted on the carrying amount of the contractual service margin during the reporting period, measured at the discount rates specified in paragraph B72(b); (c) the changes in fulfilment cash flows relating to future service as specified in paragraphs B96-B100, except to the extent that: (i) such increases in the fulfilment cash flows exceed the carrying amount of the contractual service margin, giving rise to a loss (see paragraph....
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....ervices in the period, determined by the allocation of the contractual service margin remaining at the end of the reporting period (before any allocation) over the current and remaining coverage period applying paragraph B119. 46. Some changes in the contractual service margin offset changes in the fulfilment cash flows for the liability for remaining coverage, resulting in no change in the total carrying amount of the liability for remaining coverage. To the extent that changes in the contractual service margin do not offset changes in the fulfilment cash flows for the liability for remaining coverage, an entity shall recognise income and expenses for the changes, applying paragraph 41. Onerous contracts 47. An insurance contract is onerous at the date of initial recognition if the fulfilment cash flows allocated to the contract, any previously recognised insurance acquisition cash flows and any cash flows arising from the contract at the date of initial recognition in total are a net outflow. Applying paragraph 16(a), an entity shall group such contracts separately from contracts that are not onerous. To the extent that paragraph 17 applies, an entity may identify the grou....
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.... the amount allocated to the loss component. 51. The subsequent changes in the fulfilment cash flows of the liability for remaining coverage to be allocated applying paragraph 50(a) are: (a) estimates of the present value of future cash flows for claims and expenses released from the liability for remaining coverage because of incurred insurance service expenses; (b) changes in the risk adjustment for non-financial risk recognised in profit or loss because of the release from risk; and (c) insurance finance income or expenses. 52. The systematic allocation required by paragraph 50(a) shall result in the total amounts allocated to the loss component in accordance with paragraphs 48-50 being equal to zero by the end of the coverage period of a group of contracts. Premium allocation approach 53. An entity may simplify the measurement of a group of insurance contracts using the premium allocation approach set out in paragraphs 55-59 if, and only if, at the inception of the group: (a) the entity reasonably expects that such simplification would produce a measurement of the liability for remaining coverage for the group that would not differ materially from the one that ....
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....ce contracts in the group have a significant financing component, an entity shall adjust the carrying amount of the liability for remaining coverage to reflect the time value of money and the effect of financial risk using the discount rates specified in paragraph 36, as determined on initial recognition. The entity is not required to adjust the carrying amount of the liability for remaining coverage to reflect the time value of money and the effect of financial risk if, at initial recognition, the entity expects that the time between providing each part of the services and the related premium due date is no more than a year. 57. If at any time during the coverage period, facts and circumstances indicate that a group of insurance contracts is onerous, an entity shall calculate the difference between: (a) the carrying amount of the liability for remaining coverage determined applying paragraph 55; and (b) the fulfilment cash flows that relate to remaining coverage of the group, applying paragraphs 33-37 and B36-B92. However, if, in applying paragraph 59(b), the entity does not adjust the liability for incurred claims for the time value of money and the effect of financial risk....
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.... 63. In applying the measurement requirements of paragraphs 32-36 to reinsurance contracts held, to the extent that the underlying contracts are also measured applying those paragraphs, the entity shall use consistent assumptions to measure the estimates of the present value of the future cash flows for the group of reinsurance contracts held and the estimates of the present value of the future cash flows for the group(s) of underlying insurance contracts. In addition, the entity shall include in the estimates of the present value of the future cash flows for the group of reinsurance contracts held the effect of any risk of non-performance by the issuer of the reinsurance contract, including the effects of collateral and losses from disputes. 64. Instead of applying paragraph 37, an entity shall determine the risk adjustment for non-financial risk so that it represents the amount of risk being transferred by the holder of the group of reinsurance contracts to the issuer of those contracts. 65. The requirements of paragraph 38 that relate to determining the contractual service margin on initial recognition are modified to reflect the fact that for a group of reinsurance contra....
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.... service margin; and (e) the amount recognised in profit or loss because of services received in the period, determined by the allocation of the contractual service margin remaining at the end of the reporting period (before any allocation) over the current and remaining coverage period of the group of reinsurance contracts held, applying paragraph B119. 66A An entity shall adjust the contractual service margin of a group of reinsurance contracts held, and as a result recognise income, when the entity recognises a loss on initial recognition of an onerous group of underlying insurance contracts or on addition of onerous underlying insurance contracts to a group (see paragraphs B119C‒B119E). 66B An entity shall establish (or adjust) a loss-recovery component of the asset for remaining coverage for a group of reinsurance contracts held depicting the recovery of losses recognised applying paragraphs 66(c)(i)‒(ii) and 66A. The loss-recovery component determines the amounts that are presented in profit or loss as reversals of recoveries of losses from reinsurance contracts held and are consequently excluded from the allocation of premiums paid to the reinsurer (see par....
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....aragraphs 25 and 28) is the date the entity becomes party to the contract. (b) the contract boundary (see paragraph 34) is modified so that cash flows are within the contract boundary if they result from a substantive obligation of the entity to deliver cash at a present or future date. The entity has no substantive obligation to deliver cash if it has the practical ability to set a price for the promise to deliver the cash that fully reflects the amount of cash promised and related risks. (c) the allocation of the contractual service margin (see paragraphs 44(e) and 45(e)) is modified so that the entity shall recognise the contractual service margin over the duration of the group of contracts in a systematic way that reflects the transfer of investment services under the contract. Modification and derecognition Modification of an insurance contract 72. If the terms of an insurance contract are modified, for example by agreement between the parties to the contract or by a change in regulation, an entity shall derecognise the original contract and recognise the modified contract as a new contract, applying Ind AS 117 or other applicable Standards if, and only if, any of ....
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....to the rights and obligations that have been derecognised from the group, applying paragraphs 40(a)(i) and 40(b); (b) the contractual service margin of the group is adjusted for the change in fulfilment cash flows described in (a), to the extent required by paragraphs 44(c) and 45(c), unless paragraph 77 applies; and (c) the number of coverage units for expected remaining insurance contract services is adjusted to reflect the coverage units derecognised from the group, and the amount of the contractual service margin recognised in profit or loss in the period is based on that adjusted number, applying paragraph B119. 77. When an entity derecognises an insurance contract because it transfers the contract to a third party or derecognises an insurance contract and recognises a new contract applying paragraph 72, the entity shall instead of applying paragraph 76(b): (a) adjust the contractual service margin of the group from which the contract has been derecognised, to the extent required by paragraphs 44(c) and 45(c), for the difference between (i) and either (ii) for contracts transferred to a third party or (iii) for contracts derecognised applying paragraph 72: (i) the ch....
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....ue shall depict the provision of services arising from the group of insurance contracts at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those services. Paragraphs B120-B127 specify how an entity measures insurance revenue. 84. An entity shall present in profit or loss insurance service expenses arising from a group of insurance contracts issued, comprising incurred claims (excluding repayments of investment components), other incurred insurance service expenses and other amounts as described in paragraph 103(b). 85. Insurance revenue and insurance service expenses presented in profit or loss shall exclude any investment components. An entity shall not present premium information in profit or loss if that information is inconsistent with paragraph 83. 86. An entity may present the income or expenses from a group of reinsurance contracts held (see paragraphs 60- 70A), other than insurance finance income or expenses, as a single amount; or the entity may present separately the amounts recovered from the reinsurer and an allocation of the premiums paid that together give a net amount equal to that single amount. If an entity....
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....insurance finance income or expenses for the period in profit or loss; or (b) disaggregating insurance finance income or expenses for the period to include in profit or loss an amount that eliminates accounting mismatches with income or expenses included in profit or loss on the underlying items held, applying paragraphs B134-B136. 90. If an entity chooses the accounting policy set out in paragraph 88(b) or in paragraph 89(b), it shall include in other comprehensive income the difference between the insurance finance income or expenses measured on the basis set out in those paragraphs and the total insurance finance income or expenses for the period. 91. If an entity transfers a group of insurance contracts or derecognises an insurance contract applying paragraph 77: (a) it shall reclassify to profit or loss as a reclassification adjustment (see Ind AS 1, Presentation of Financial Statements) any remaining amounts for the group (or contract) that were previously recognised in other comprehensive income because the entity chose the accounting policy set out in paragraph 88(b). (b) it shall not reclassify to profit or loss as a reclassification adjustment (see Ind AS 1....
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....ht be appropriate for information disclosed about insurance contracts are: (a) type of contract (for example, major product lines); (b) geographical area (for example, country or region); or (c) reportable segment, as defined in Ind AS 108, Operating Segments. Explanation of recognised amounts 97. Of the disclosures required by paragraphs 98-109A, only those in paragraphs 98-100, 102-103, 105-105B and 109A apply to contracts to which the premium allocation approach has been applied. If an entity uses the premium allocation approach, it shall also disclose: (a) which of the criteria in paragraphs 53 and 69 it has satisfied; (b) whether it makes an adjustment for the time value of money and the effect of financial risk applying paragraphs 56. 57(b) and 59(b); and (c) the method it has chosen to recognise insurance acquisition cash flows applying paragraph 59(a). 98. An entity shall disclose reconciliations that show how the net carrying amounts of contracts within the scope of Ind AS 117 changed during the period because of cash flows and income and expenses recognised in the statement(s) of profit and loss. Separate reconciliations shall be disclosed for insurance....
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....rred claims (excluding investment components) and other incurred insurance service expenses; (ii) amortisation of insurance acquisition cash flows; (iii) changes that relate to past service, ie changes in fulfilment cash flows relating to the liability for incurred claims; and (iv) changes that relate to future service, ie losses on onerous groups of contracts and reversals of such losses. (c) investment components excluded from insurance revenue and insurance service expenses (combined with refunds of premiums unless refunds of premiums are presented as part of the cash flows in the period described in paragraph 105(a)(i)). 104. An entity shall separately disclose in the reconciliations required in paragraph 101 each of the following amounts related to services, if applicable: (a) changes that relate to future service, applying paragraphs B96-B118, showing separately: (i) changes in estimates that adjust the contractual service margin; (ii) changes in estimates that do not adjust the contractual service margin, ie losses on groups of onerous contracts and reversals of such losses; and (iii) the effects of contracts initially recognised in the period. (b) changes ....
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....uring the period as specified in paragraph B124(a); (ii) the change in the risk adjustment for non-financial risk, as specified in paragraph B124(b); (iii) the amount of the contractual service margin recognised in profit or loss because of the transfer of insurance contract services in the period, as specified in paragraph B124(c); and (iv) other amounts, if any, for example, experience adjustments for premium receipts other than those that relate to future service as specified in paragraph B124(d). (b) the allocation of the portion of the premiums that relate to the recovery of insurance acquisition cash flows (see paragraph B125). 107. For insurance contracts other than those to which the premium allocation approach described in paragraphs 53-59 or 69-70A has been applied, an entity shall disclose the effect on the balance sheet separately for insurance contracts issued and reinsurance contracts held that are initially recognised in the period, showing their effect at initial recognition on: (a) the estimates of the present value of future cash outflows, showing separately the amount of the insurance acquisition cash flows; (b) the estimates of the present value o....
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....cted; and (c) the carrying amount of the group of insurance contracts to which the change applied at the date of the change. Transition amounts 114. An entity shall provide disclosures that enable users of financial statements to identify the effect of groups of insurance contracts measured at the transition date applying the modified retrospective approach (see paragraphs C6-C19A) or the fair value approach (see paragraphs C20-C24B) on the contractual service margin and insurance revenue in subsequent periods. Hence an entity shall disclose the reconciliation of the contractual service margin applying paragraph 101(c), and the amount of insurance revenue applying paragraph 103(a), separately for: (a) insurance contracts that existed at the transition date to which the entity has applied the modified retrospective approach; (b) insurance contracts that existed at the transition date to which the entity has applied the fair value approach; and (c) all other insurance contracts. 115. For all periods in which disclosures are made applying paragraphs 114(a) or 114(b), to enable users of financial statements to understand the nature and significance of the methods used an....
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....d an insurance finance component or are presented in full in the insurance service result; (iii) to determine discount rates; (iv) to determine investment components; and (v) to determine the relative weighting of the benefits provided by insurance coverage and investment-return service or by insurance coverage and investment-related service (see paragraphs B119-B119B). 118. If, applying paragraph 88(b) or paragraph 89(b), an entity chooses to disaggregate insurance finance income or expenses into amounts presented in profit or loss and amounts presented in other comprehensive income, the entity shall disclose an explanation of the methods used to determine the insurance finance income or expenses recognised in profit or loss. 119. An entity shall disclose the confidence level used to determine the risk adjustment for non-financial risk. If the entity uses a technique other than the confidence level technique for determining the risk adjustment for non-financial risk, it shall disclose the technique used and the confidence level corresponding to the results of that technique. 120. An entity shall disclose the yield curve (or range of yield curves) used to discount cash....
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....ion and measurement requirements of Ind AS 117, it shall disclose that fact. All types of risk--concentrations of risk 127. An entity shall disclose information about concentrations of risk arising from contracts within the scope of Ind AS 117, including a description of how the entity determines the concentrations, and a description of the shared characteristic that identifies each concentration (for example, the type of insured event, industry, geographical area, or currency). Concentrations of financial risk might arise, for example, from interest-rate guarantees that come into effect at the same level for a large number of contracts. Concentrations of financial risk might also arise from concentrations of non-financial risk; for example, if an entity provides product liability protection to pharmaceutical companies and also holds investments in those companies. Insurance and market risks--sensitivity analysis 128. An entity shall disclose information about sensitivities to changes in risk variables arising from contracts within the scope of Ind AS 117. To comply with this requirement, an entity shall disclose: (a) a sensitivity analysis that shows how profit or loss....
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....s from contracts within the scope of Ind AS 117, an entity shall disclose: (a) the amount that best represents its maximum exposure to credit risk at the end of the reporting period, separately for insurance contracts issued and reinsurance contracts held; and (b) information about the credit quality of reinsurance contracts held that are assets. Liquidity risk--other information 132. For liquidity risk arising from contracts within the scope of Ind AS 117, an entity shall disclose: (a) a description of how it manages the liquidity risk. (b) separate maturity analyses for portfolios of insurance contracts issued that are liabilities and portfolios of reinsurance contracts held that are liabilities that show, as a minimum, net cash flows of the portfolios for each of the first five years after the reporting date and in aggregate beyond the first five years. An entity is not required to include in these analyses liabilities for remaining coverage measured applying paragraphs 55-59 and paragraphs 69-70A. The analyses may take the form of: (i) an analysis, by estimated timing, of the remaining contractual undiscounted net cash flows; or (ii) an analysis, by estimated t....
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....b) have no significant possibility of becoming onerous subsequently, if any; or (c) do not fall into either (a) or (b), if any. insurance acquisition cash flows Cash flows arising from the costs of selling, underwriting and starting a group of insurance contracts (issued or expected to be issued) that are directly attributable to the portfolio of insurance contracts to which the group belongs. Such cash flows include cash flows that are not directly attributable to individual contracts or groups of insurance contracts within the portfolio. insurance contract A contract under which one party (the issuer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. insurance contract services The following services that an entity provides to a policyholder of an insurance contract: (a) coverage for an insured event (insurance coverage); (b) for insurance contracts without direct participation features, the generation of an investment return for the policyholder, if applicable (investment-return service); and (c) for insuran....
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....tment components or other amounts that are not related to the provision of insurance contract services and that are not in the liability for remaining coverage. liability for remaining coverage An entity's obligation to: (a) investigate and pay valid claims under existing insurance contracts for insured events that have not yet occurred (ie the obligation that relates to the unexpired portion of the insurance coverage); and (b) pay amounts under existing insurance contracts that are not included in (a) and that relate to: (i) insurance contract services not yet provided (ie the obligations that relate to future provision of insurance contract services); or (ii) any investment components or other amounts that are not related to the provision of insurance contract services and that have not been transferred to the liability for incurred claims. policyholder A party that has a right to compensation under an insurance contract if an insured event occurs. portfolio of insurance contracts Insurance contracts subject to similar risks and managed together. reinsurance contract An insurance contract issued by one entity (the reinsurer) to compensate another entity for claim....
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....ent that occurs during the term of the contract, even if the resulting loss is discovered after the end of the contract term. B5 Some insurance contracts cover events that have already occurred but the financial effect of which is still uncertain. An example is an insurance contract that provides insurance coverage against an adverse development of an event that has already occurred. In such contracts, the insured event is the determination of the ultimate cost of those claims. Payments in kind B6 Some insurance contracts require or permit payments to be made in kind. In such cases, the entity provides goods or services to the policyholder to settle the entity's obligation to compensate the policyholder for insured events. An example is when the entity replaces a stolen article instead of reimbursing the policyholder for the amount of its loss. Another example is when an entity uses its own hospitals and medical staff to provide medical services covered by the insurance contract. Such contracts are insurance contracts, even though the claims are settled in kind. Fixed-fee service contracts that meet the conditions specified in paragraph 8 are also insurance contracts, but ap....
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....n future event--the survival of the person who receives the annuity. The link to the price index is a derivative, but it also transfers insurance risk because the number of payments to which the index applies depends on the survival of the annuitant. If the resulting transfer of insurance risk is significant, the derivative meets the definition of an insurance contract, in which case it shall not be separated from the host contract (see paragraph 11(a)). B11 Insurance risk is the risk the entity accepts from the policyholder. This means the entity must accept, from the policyholder, a risk to which the policyholder was already exposed. Any new risk created by the contract for the entity or the policyholder is not insurance risk. B12 The definition of an insurance contract refers to an adverse effect on the policyholder. This definition does not limit the payment by the entity to an amount equal to the financial effect of the adverse event. For example, the definition includes 'new for old' insurance coverage that pays the policyholder an amount that permits the replacement of a used and damaged asset with a new one. Similarly, the definition does not limit the payment under a l....
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....te from the policyholder. In the case of a mutual entity, the mutual entity accepts risk from each policyholder and pools that risk. Although policyholders bear that pooled risk collectively because they hold the residual interest in the entity, the mutual entity is a separate entity that has accepted the risk. Significant insurance risk B17 A contract is an insurance contract only if it transfers significant insurance risk. Paragraphs B7-B16 discuss insurance risk. Paragraphs B18-B23 discuss the assessment of whether the insurance risk is significant. B18 Insurance risk is significant if, and only if, an insured event could cause the issuer to pay additional amounts that are significant in any single scenario, excluding scenarios that have no commercial substance (ie no discernible effect on the economics of the transaction). If an insured event could mean significant additional amounts would be payable in any scenario that has commercial substance, the condition in the previous sentence can be met even if the insured event is extremely unlikely, or even if the expected (ie probability-weighted) present value of the contingent cash flows is a small proportion of the expecte....
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....er does not take on insurance risk in relation to the possible death of a client. Consequently, the potential loss of future investment management fees is not relevant when assessing how much insurance risk is transferred by a contract. (b) a waiver, on death, of charges that would be made on cancellation or surrender. Because the contract brought those charges into existence, their waiver does not compensate the policyholder for a pre-existing risk. Consequently, they are not relevant when assessing how much insurance risk is transferred by a contract. (c) a payment conditional on an event that does not cause a significant loss to the holder of the contract. For example, consider a contract that requires the issuer to pay CU [CU denotes currency unit.] million if an asset suffers physical damage that causes an insignificant economic loss of CU1 to the holder. In this contract, the holder transfers the insignificant risk of losing CU1 to the issuer. At the same time, the contract creates a non-insurance risk that the issuer will need to pay CU999,999 if the specified event occurs. Because there is no scenario in which an insured event causes a significant loss to the holder of ....
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....ows that would occur when the option is exercised are within the boundary of the contract. B25 A contract that meets the definition of an insurance contract remains an insurance contract until all rights and obligations are extinguished (ie discharged, cancelled or expired), unless the contract is derecognised applying paragraphs 74-77, because of a contract modification. Examples of insurance contracts B26 The following are examples of contracts that are insurance contracts if the transfer of insurance risk is significant: (a) insurance against theft or damage. (b) insurance against product liability, professional liability, civil liability or legal expenses. (c) life insurance and prepaid funeral plans (although death is certain, it is uncertain when death will occur or, for some types of life insurance, whether death will occur within the period covered by the insurance). (d) life-contingent annuities and pensions, ie contracts that provide compensation for the uncertain future event--the survival of the annuitant or pensioner--to provide the annuitant or pensioner with a level of income that would otherwise be adversely affected by his or her survival. (Employers....
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....y an entity that also issues insurance contracts, applying paragraph 3(c). (b) contracts that have the legal form of insurance, but return all significant insurance risk to the policyholder through non-cancellable and enforceable mechanisms that adjust future payments by the policyholder to the issuer as a direct result of insured losses. For example, some financial reinsurance contracts or some group contracts return all significant insurance risk to the policyholders; such contracts are normally financial instruments or service contracts (see paragraph B28). (c) self-insurance (ie retaining a risk that could have been covered by insurance). In such situations, there is no insurance contract because there is no agreement with another party. Thus, if an entity issues an insurance contract to its parent, subsidiary or fellow subsidiary, there is no insurance contract in the consolidated financial statements because there is no contract with another party. However, for the individual or separate financial statements of the issuer or holder, there is an insurance contract. (d) contracts (such as gambling contracts) that require a payment if a specified uncertain future event occ....
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....ance contracts and has used accounting applicable to insurance contracts (see paragraph 7(e)). B30 Credit-related guarantees and credit insurance contracts that require payment, even if the policyholder has not incurred a loss on the failure of the debtor to make payments when due, are outside the scope of Ind AS 117 because they do not transfer significant insurance risk. Such contracts include those that require payment: (a) regardless of whether the counterparty holds the underlying debt instrument; or (b) on a change in the credit rating or the credit index, rather than on the failure of a specified debtor to make payments when due. Separating components from an insurance contract (paragraphs 10-13) Investment components (paragraph 11(b)) B31 Paragraph 11(b) requires an entity to separate a distinct investment component from the host insurance contract. An investment component is distinct if, and only if, both the following conditions are met: (a) the investment component and the insurance component are not highly interrelated. (b) a contract with equivalent terms is sold, or could be sold, separately in the same market or the same jurisdiction, either by enti....
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....ws and risks associated with the insurance components in the contract; and (b) the entity provides a significant service in integrating the good or service with the insurance components. Insurance acquisition cash flows (paragraphs 28A‒28F) B35A To apply paragraph 28A, an entity shall use a systematic and rational method to allocate: (a) insurance acquisition cash flows directly attributable to a group of insurance contracts: (i) to that group; and (ii) to groups that will include insurance contracts that are expected to arise from renewals of the insurance contracts in that group. (b) insurance acquisition cash flows directly attributable to a portfolio of insurance contracts, other than those in (a), to groups of contracts in the portfolio. B35B At the end of each reporting period, an entity shall revise amounts allocated as specified in paragraph B35A to reflect any changes in assumptions that determine the inputs to the method of allocation used. An entity shall not change amounts allocated to a group of insurance contracts after all contracts have been added to the group (see paragraph B35C). B35C An entity might add insurance contracts to a group of i....
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....recasts of future conditions (see paragraph B41). Information available from an entity's own information systems is considered to be available without undue cost or effort. B38 The starting point for an estimate of the cash flows is a range of scenarios that reflects the full range of possible outcomes. Each scenario specifies the amount and timing of the cash flows for a particular outcome, and the estimated probability of that outcome. The cash flows from each scenario are discounted and weighted by the estimated probability of that outcome to derive an expected present value. Consequently, the objective is not to develop a most likely outcome, or a more-likely-than-not outcome, for future cash flows. B39 When considering the full range of possible outcomes, the objective is to incorporate all reasonable and supportable information available without undue cost or effort in an unbiased way, rather than to identify every possible scenario. In practice, developing explicit scenarios is unnecessary if the resulting estimate is consistent with the measurement objective of considering all reasonable and supportable information available without undue cost or effort when determining....
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....ers of insurance contracts. This information shall be adjusted to reflect the differences between the cash flows that arise from those reinsurance contracts or other financial instruments, and the cash flows that would arise as the entity fulfils the underlying contracts with the policyholder. Market variables and non-market variables B42 Ind AS 117 identifies two types of variables: (a) market variables--variables that can be observed in, or derived directly from, markets (for example, prices of publicly traded securities and interest rates); and (b) non-market variables--all other variables (for example, the frequency and severity of insurance claims and mortality). B43 Market variables will generally give rise to financial risk (for example, observable interest rates) and nonmarket variables will generally give rise to non-financial risk (for example, mortality rates). However, this will not always be the case. For example, there may be assumptions that relate to financial risks for which variables cannot be observed in, or derived directly from, markets (for example, interest rates that cannot be observed in, or derived directly from, markets). Market variables (pa....
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....o determine the technique that best meets the objective of consistency with observable market variables in specific circumstances. In particular, the technique used must result in the measurement of any options and guarantees included in the insurance contracts being consistent with observable market prices (if any) for such options and guarantees. Non-market variables B49 Estimates of non-market variables shall reflect all reasonable and supportable evidence available without undue cost or effort, both external and internal. B50 Non-market external data (for example, national mortality statistics) may have more or less relevance than internal data (for example, internally developed mortality statistics), depending on the circumstances. For example, an entity that issues life insurance contracts shall not rely solely on national mortality statistics, but shall consider all other reasonable and supportable internal and external sources of information available without undue cost or effort when developing unbiased estimates of probabilities for mortality scenarios for its insurance contracts. In developing those probabilities, an entity shall give more weight to the more persu....
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.... end of the reporting period. (b) the changes in estimates faithfully represent the changes in conditions during the period. For example, suppose that estimates were at one end of a reasonable range at the beginning of the period. If the conditions have not changed, shifting the estimates to the other end of the range at the end of the period would not faithfully represent what has happened during the period. If an entity's most recent estimates are different from its previous estimates, but conditions have not changed, it shall assess whether the new probabilities assigned to each scenario are justified. In updating its estimates of those probabilities, the entity shall consider both the evidence that supported its previous estimates and all newly available evidence, giving more weight to the more persuasive evidence. B55 The probability assigned to each scenario shall reflect the conditions at the end of the reporting period. Consequently, applying Ind AS 10, Events after the Reporting Period, an event occurring after the end of the reporting period that resolves an uncertainty that existed at the end of the reporting period does not provide evidence of the conditions that ....
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....lable without undue cost or effort. B59 Similarly, if cash flows allocated to a group of insurance contracts are sensitive to inflation, the determination of the fulfilment cash flows shall reflect current estimates of possible future inflation rates. Because inflation rates are likely to be correlated with interest rates, the measurement of fulfilment cash flows shall reflect the probabilities for each inflation scenario in a way that is consistent with the probabilities implied by the market interest rates used in estimating the discount rate (see paragraph B51). B60 When estimating the cash flows, an entity shall take into account current expectations of future events that might affect those cash flows. The entity shall develop cash flow scenarios that reflect those future events, as well as unbiased estimates of the probability of each scenario. However, an entity shall not take into account current expectations of future changes in legislation that would change or discharge the present obligation or create new obligations under the existing insurance contract until the change in legislation is substantively enacted. Cash flows within the contract boundary (paragraph 34) ....
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....ance contracts, even if the price set for each individual policyholder does not reflect the change in risk for that specific policyholder. When assessing whether the entity has the practical ability to set a price that fully reflects the risks in the contract or portfolio, it shall consider all the risks that it would consider when underwriting equivalent contracts on the renewal date for the remaining service. In determining the estimates of future cash flows at the end of a reporting period, an entity shall reassess the boundary of an insurance contract to include the effect of changes in circumstances on the entity's substantive rights and obligations. B65 Cash flows within the boundary of an insurance contract are those that relate directly to the fulfilment of the contract, including cash flows for which the entity has discretion over the amount or timing. The cash flows within the boundary include: (a) premiums (including premium adjustments and instalment premiums) from a policyholder and any additional cash flows that result from those premiums. (b) payments to (or on behalf of) a policyholder, including claims that have already been reported but have not yet been pai....
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.... an investment return from which policyholders will benefit if an insured event occurs. (ii) providing investment-return service to policyholders of insurance contracts without direct participation features (see paragraph B119B). (iii) providing investment-related service to policyholders of insurance contracts with direct participation features. (l) an allocation of fixed and variable overheads (such as the costs of accounting, human resources, information technology and support, building depreciation, rent, and maintenance and utilities) directly attributable to fulfilling insurance contracts. Such overheads are allocated to groups of contracts using methods that are systematic and rational, and are consistently applied to all costs that have similar characteristics. (m) any other costs specifically chargeable to the policyholder under the terms of the contract. B66 The following cash flows shall not be included when estimating the cash flows that will arise as the entity fulfils an existing insurance contract: (a) investment returns. Investments are recognised, measured and presented separately. (b) cash flows (payments or receipts) that arise under reinsurance con....
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....rns on the same specified pool of underlying items; and (b) either: (i) the policyholder to bear a reduction in their share of the returns on the underlying items because of payments to policyholders of other contracts that share in that pool, including payments arising under guarantees made to policyholders of those other contracts; or (ii) policyholders of other contracts to bear a reduction in their share of returns on the underlying items because of payments to the policyholder, including payments arising from guarantees made to the policyholder. B68 Sometimes, such contracts will affect the cash flows to policyholders of contracts in other groups. The fulfilment cash flows of each group reflect the extent to which the contracts in the group cause the entity to be affected by expected cash flows, whether to policyholders in that group or to policyholders in another group. Hence the fulfilment cash flows for a group: (a) include payments arising from the terms of existing contracts to policyholders of contracts in other groups, regardless of whether those payments are expected to be made to current or future policyholders; and (b) exclude payments to policyholders in....
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....o adjust the carrying amount of the liability for remaining coverage applying paragraph 56--discount rates applying paragraph 36 determined on initial recognition; (e) if an entity chooses to disaggregate insurance finance income or expenses between profit or loss and other comprehensive income (see paragraph 88), to determine the amount of the insurance finance income or expenses included in profit or loss: (i) for groups of insurance contracts for which changes in assumptions that relate to financial risk do not have a substantial effect on the amounts paid to policyholders, applying paragraph B131--discount rates determined at the date of initial recognition of a group of contracts, applying paragraph 36 to nominal cash flows that do not vary based on the returns on any underlying items; (ii) for groups of insurance contracts for which changes in assumptions that relate to financial risk have a substantial effect on the amounts paid to policyholders, applying paragraph B132(a)(i)--discount rates that allocate the remaining revised expected finance income or expenses over the remaining duration of the group of contracts at a constant rate; and (iii) for groups of contract....
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....s. B77 Ind AS 117 does not require an entity to divide estimated cash flows into those that vary based on the returns on underlying items and those that do not. If an entity does not divide the estimated cash flows in this way, the entity shall apply discount rates appropriate for the estimated cash flows as a whole; for example, using stochastic modelling techniques or risk-neutral measurement techniques. B78 Discount rates shall include only relevant factors, ie factors that arise from the time value of money, the characteristics of the cash flows and the liquidity characteristics of the insurance contracts. Such discount rates may not be directly observable in the market. Hence, when observable market rates for an instrument with the same characteristics are not available, or observable market rates for similar instruments are available but do not separately identify the factors that distinguish the instrument from the insurance contracts, an entity shall estimate the appropriate rates. Ind AS 117 does not require a particular estimation technique for determining discount rates. In applying an estimation technique, an entity shall: (a) maximise the use of observable inputs....
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....red to adjust the yield curve for differences in liquidity characteristics of the insurance contracts and the reference portfolio. B82 In estimating the yield curve described in paragraph B81: (a) if there are observable market prices in active markets for assets in the reference portfolio, an entity shall use those prices (consistent with paragraph 69 of Ind AS 113). (b) if a market is not active, an entity shall adjust observable market prices for similar assets to make them comparable to market prices for the assets being measured (consistent with paragraph 83 of Ind AS 113). (c) if there is no market for assets in the reference portfolio, an entity shall apply an estimation technique. For such assets (consistent with paragraph 89 of Ind AS 113) an entity shall: (i) develop unobservable inputs using the best information available in the circumstances. Such inputs might include the entity's own data and, in the context of Ind AS 117, the entity might place more weight on long-term estimates than on short-term fluctuations; and (ii) adjust those data to reflect all information about market participant assumptions that is reasonably available. B83 In adjusting the yie....
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.... the market price of a credit derivative as a reference point. Risk adjustment for non-financial risk (paragraph 37) B86 The risk adjustment for non-financial risk relates to risk arising from insurance contracts other than financial risk. Financial risk is included in the estimates of the future cash flows or the discount rate used to adjust the cash flows. The risks covered by the risk adjustment for non-financial risk are insurance risk and other non-financial risks such as lapse risk and expense risk (see paragraph B14). B87 The risk adjustment for non-financial risk for insurance contracts measures the compensation that the entity would require to make the entity indifferent between: (a) fulfilling a liability that has a range of possible outcomes arising from non-financial risk; and (b) fulfilling a liability that will generate fixed cash flows with the same expected present value as the insurance contracts. For example, the risk adjustment for non-financial risk would measure the compensation the entity would require to make it indifferent between fulfilling a liability that--because of non-financial risk--has a 50 per cent probability of being CU90 and a 50 per....
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....y; (b) for similar risks, contracts with a longer duration will result in higher risk adjustments for nonfinancial risk than contracts with a shorter duration; (c) risks with a wider probability distribution will result in higher risk adjustments for non-financial risk than risks with a narrower distribution; (d) the less that is known about the current estimate and its trend, the higher will be the risk adjustment for non-financial risk; and (e) to the extent that emerging experience reduces uncertainty about the amount and timing of cash flows, risk adjustments for non-financial risk will decrease and vice versa. B92 An entity shall apply judgement when determining an appropriate estimation technique for the risk adjustment for non-financial risk. When applying that judgement, an entity shall also consider whether the technique provides concise and informative disclosure so that users of financial statements can benchmark the entity's performance against the performance of other entities. Paragraph 119 requires an entity that uses a technique other than the confidence level technique for determining the risk adjustment for nonfinancial risk to disclose the technique use....
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.... for remaining coverage at the date of the transaction by multiplying: (a) the loss component of the liability for remaining coverage of the underlying insurance contracts at the date of the transaction; and (b) the percentage of claims on the underlying insurance contracts the entity expects at the date of the transaction to recover from the group of reinsurance contracts held. B95C The entity shall recognise the amount of the loss-recovery component determined applying paragraph B95B as part of goodwill or gain on a bargain purchase as capital reserve either directly or through Other Comprehensive Income as per the requirements of Ind AS 103 for reinsurance contracts held acquired in a business combination within the scope of Ind AS 103, or as income in profit or loss for contracts acquired in a transfer. B95D Applying paragraphs 14‒22, at the date of the transaction an entity might include in an onerous group of insurance contracts both onerous insurance contracts covered by a group of reinsurance contracts held and onerous contracts not covered by the group of reinsurance contracts held. To apply paragraph B95B in such cases, an entity shall use a systematic and r....
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....ed at the start of the period plus any insurance finance income or expenses related to that expected payment before it becomes payable. (ca) differences between any loan to a policyholder expected to become repayable in the period and the actual loan to a policyholder that becomes repayable in the period. Those differences are determined by comparing (i) the actual loan to a policyholder that becomes repayable in the period with (ii) the repayment in the period that was expected at the start of the period plus any insurance finance income or expenses related to that expected repayment before it becomes repayable. (d) changes in the risk adjustment for non-financial risk that relate to future service. An entity is not required to disaggregate the change in the risk adjustment for non-financial risk between (i) a change related to non-financial risk and (ii) the effect of the time value of money and changes in the time value of money. If an entity makes such a disaggregation, it shall adjust the contractual service margin for the change related to non-financial risk, measured at the discount rates specified in paragraph B72(c). B97 An entity shall not adjust the contractual se....
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....ich: (a) the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items (see paragraphs B105- B106); (b) the entity expects to pay to the policyholder an amount equal to a substantial share of the fair value returns on the underlying items (see paragraph B107); and (c) the entity expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the change in fair value of the underlying items (see paragraph B107). B102 An entity shall assess whether the conditions in paragraph B101 are met using its expectations at inception of the contract and shall not reassess the conditions afterwards, unless the contract is modified, applying paragraph 72. B103 To the extent that insurance contracts in a group affect the cash flows to policyholders of contracts in other groups (see paragraphs B67-B71), an entity shall assess whether the conditions in paragraph B101 are met by considering the cash flows that the entity expects to pay the policyholders determined applying paragraphs B68-B70. B104 The conditions in paragraph B101 ensure that insurance contracts with direct participati....
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....es being contracts under which the entity provides investment-related services and is compensated for the services by a fee that is determined by reference to the underlying items; and (b) assess the variability in the amounts in paragraphs B101(b) and B101(c): (i) over the duration of the insurance contract; and (ii) on a present value probability-weighted average basis, not a best or worst outcome basis (see paragraphs B37-B38). B108 For example, if the entity expects to pay a substantial share of the fair value returns on underlying items, subject to a guarantee of a minimum return, there will be scenarios in which: (a) the cash flows that the entity expects to pay to the policyholder vary with the changes in the fair value of the underlying items because the guaranteed return and other cash flows that do not vary based on the returns on underlying items do not exceed the fair value return on the underlying items; and (b) the cash flows that the entity expects to pay to the policyholder do not vary with the changes in the fair value of the underlying items because the guaranteed return and other cash flows that do not vary based on the returns on underlying items exc....
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.... (a) the amount of the entity's share of the underlying items (see paragraph B112) if the entity mitigates the effect of financial risk on that amount using derivatives or reinsurance contracts held; and (b) the fulfilment cash flows set out in paragraph B113(b) if the entity mitigates the effect of financial risk on those fulfilment cash flows using derivatives, non-derivative financial instruments measured at fair value through profit or loss, or reinsurance contracts held. B116 To apply paragraph B115, an entity must have a previously documented risk-management objective and strategy for mitigating financial risk as described in paragraph B115. In applying that objective and strategy: (a) an economic offset exists between the insurance contracts and the derivative, non-derivative financial instrument measured at fair value through profit or loss, or reinsurance contract held (ie the values of the insurance contracts and those risk mitigating items generally move in opposite directions because they respond in a similar way to the changes in the risk being mitigated). An entity shall not consider accounting measurement differences in assessing the economic offset. (b) cr....
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....policyholders included in the fulfilment cash flows applying paragraph B68. B119B Insurance contracts without direct participation features may provide an investment-return service if, and only if: (a) an investment component exists, or the policyholder has a right to withdraw an amount; (b) the entity expects the investment component or amount the policyholder has a right to withdraw to include an investment return (an investment return could be below zero, for example, in a negative interest rate environment); and (c) the entity expects to perform investment activity to generate that investment return. Reinsurance contracts held--recognition of recovery of losses on underlying insurance contracts (paragraphs 66A−66B) B119C Paragraph 66A applies if, and only if, the reinsurance contract held is entered into before or at the same time as the onerous underlying insurance contracts are recognised. B119D To apply paragraph 66A, an entity shall determine the adjustment to the contractual service margin of a group of reinsurance contracts held and the resulting income by multiplying: (a) the loss recognised on the underlying insurance contracts; and (b) the pe....
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....l service margin. (b) amounts related to insurance acquisition cash flows. B122 Insurance revenue for a period relating to the amounts described in paragraph B121(a) is determined as set out in paragraphs B123-B124. Insurance revenue for a period relating to the amounts described in paragraph B121(b) is determined as set out in paragraph B125. B123 Applying Ind AS 115, when an entity provides services, it derecognises the performance obligation for those services and recognises revenue. Consistently, applying Ind AS 117, when an entity provides services in a period, it reduces the liability for remaining coverage for the services provided and recognises insurance revenue. The reduction in the liability for remaining coverage that gives rise to insurance revenue excludes changes in the liability that do not relate to services expected to be covered by the consideration received by the entity. Those changes are: (a) changes that do not relate to services provided in the period, for example: (i) changes resulting from cash inflows from premiums received; (ii) changes that relate to investment components in the period; (iia) changes resulting from cash flows from loans to....
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....emium receipts other than those that relate to future service (see paragraph B96(a)). B125 An entity shall determine insurance revenue related to insurance acquisition cash flows by allocating the portion of the premiums that relate to recovering those cash flows to each reporting period in a systematic way on the basis of the passage of time. An entity shall recognise the same amount as insurance service expenses. B126 When an entity applies the premium allocation approach in paragraphs 55-58, insurance revenue for the period is the amount of expected premium receipts (excluding any investment component and adjusted to reflect the time value of money and the effect of financial risk, if applicable, applying paragraph 56) allocated to the period. The entity shall allocate the expected premium receipts to each period of insurance contract services: (a) on the basis of the passage of time; but (b) if the expected pattern of release of risk during the coverage period differs significantly from the passage of time, then on the basis of the expected timing of incurred insurance service expenses. B127 An entity shall change the basis of allocation between paragraphs B126(a) and....
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....otalling zero. The cumulative amount recognised in other comprehensive income at any date is the difference between the carrying amount of the group of contracts and the amount that the group would be measured at when applying the systematic allocation. B131 For groups of insurance contracts for which changes in assumptions that relate to financial risk do not have a substantial effect on the amounts paid to the policyholder, the systematic allocation is determined using the discount rates specified in paragraph B72(e)(i). B132 For groups of insurance contracts for which changes in assumptions that relate to financial risk have a substantial effect on the amounts paid to the policyholders: (a) a systematic allocation for the finance income or expenses arising from the estimates of future cash flows can be determined in one of the following ways: (i) using a rate that allocates the remaining revised expected finance income or expenses over the remaining duration of the group of contracts at a constant rate; or (ii) for contracts that use a crediting rate to determine amounts due to the policyholders-- using an allocation that is based on the amounts credited in the period ....
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....umulated amount previously included in other comprehensive income by the date of the change as a reclassification adjustment in profit or loss in the period of change and in future periods, as follows: (i) if the entity had previously applied paragraph 88(b)--the entity shall include in profit or loss the accumulated amount included in other comprehensive income before the change as if the entity were continuing the approach in paragraph 88(b) based on the assumptions that applied immediately before the change; and (ii) if the entity had previously applied paragraph 89(b)--the entity shall include in profit or loss the accumulated amount included in other comprehensive income before the change as if the entity were continuing the approach in paragraph 89(b) based on the assumptions that applied immediately before the change. (b) not restate prior period comparative information. B136 When applying paragraph B135(a), an entity shall not recalculate the accumulated amount previously included in other comprehensive income as if the new disaggregation had always applied; and the assumptions used for the reclassification in future periods shall not be updated after the date of th....
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....each group of insurance contracts as if Ind AS 117 had always applied; (aa) identify, recognise and measure any assets for insurance acquisition cash flows as if Ind AS 117 had always applied (except that an entity is not required to apply the recoverability assessment in paragraph 28E before the transition date); (b) derecognise any existing balances that would not exist had Ind AS 117 always applied; and (c) recognise any resulting net difference in equity. C5 If, and only if, it is impracticable for an entity to apply paragraph C3 for a group of insurance contracts, an entity shall apply the following approaches instead of applying paragraph C4(a): (a) the modified retrospective approach in paragraphs C6-C19A, subject to paragraph C6 (a); or (b) the fair value approach in paragraphs C20-C24B. C5A Notwithstanding paragraph C5, an entity may choose to apply the fair value approach in paragraphs C20- C24B for a group of insurance contracts with direct participation features to which it could apply Ind AS 117 retrospectively if, and only if: (a) the entity chooses to apply the risk mitigation option in paragraph B115 to the group of insurance contracts prospectively ....
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....using information available at the transition date: (a) how to identify groups of insurance contracts, applying paragraphs 14-24; (b) whether an insurance contract meets the definition of an insurance contract with direct participation features, applying paragraphs B101-B109; (c) how to identify discretionary cash flows for insurance contracts without direct participation features, applying paragraphs B98-B100; and (d) whether an investment contract meets the definition of an investment contract with discretionary participation features within the scope of Ind AS 117, applying paragraph 71. C9A To the extent permitted by paragraph C8, an entity shall classify as a liability for incurred claims a liability for settlement of claims incurred before an insurance contract was acquired in a transfer of insurance contracts that do not form a business or in a business combination within the scope of Ind AS 103. C10 To the extent permitted by paragraph C8, an entity shall not apply paragraph 22 to divide groups into those that do not include contracts issued more than one year apart. Determining the contractual service margin or loss component for groups of insurance co....
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....paragraph B137, an entity may choose not to change the treatment of accounting estimates made in previous interim financial statements. To the extent permitted by paragraph C8, such an entity shall determine the contractual service margin or loss component at the transition date as if the entity had not prepared interim financial statements before the transition date. C14B To the extent permitted by paragraph C8, an entity shall use the same systematic and rational method the entity expects to use after the transition date when applying paragraph 28A to allocate any insurance acquisition cash flows paid (or for which a liability has been recognised applying another Ind AS) before the transition date (excluding any amount relating to insurance contracts that ceased to exist before the transition date) to: (a) groups of insurance contracts that are recognised at the transition date; and (b) groups of insurance contracts that are expected to be recognised after the transition date. C14C Insurance acquisition cash flows paid before the transition date that are allocated to a group of insurance contracts recognised at the transition date adjust the contractual service margin of....
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.... (a) the loss component of the liability for remaining coverage for the underlying insurance contracts at the transition date (see paragraphs C16 and C20); and (b) the percentage of claims for the underlying insurance contracts the entity expects to recover from the group of reinsurance contracts held. C16B Applying paragraphs 14‒22, at the transition date an entity might include in an onerous group of insurance contracts both onerous insurance contracts covered by a group of reinsurance contracts held and onerous insurance contracts not covered by the group of reinsurance contracts held. To apply paragraph C16A in such cases, an entity shall use a systematic and rational basis of allocation to determine the portion of the loss component of the group of insurance contracts that relates to insurance contracts covered by the group of reinsurance contracts held. C16C If an entity does not have reasonable and supportable information to apply paragraph C16A, the entity shall not identify a loss-recovery component for the group of reinsurance contracts held. Determining the contractual service margin or loss component for groups of insurance contracts with direct partici....
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....ntracts issued more than one year apart: (a) an entity is permitted to determine the discount rates at the date of initial recognition of a group specified in paragraphs B72(b)-B72(e)(ii) and the discount rates at the date of the incurred claim specified in paragraph B72(e)(iii) at the transition date instead of at the date of initial recognition or incurred claim. (b) if an entity chooses to disaggregate insurance finance income or expenses between amounts included in profit or loss and amounts included in other comprehensive income applying paragraphs 88(b) or 89(b), the entity needs to determine the cumulative amount of insurance finance income or expenses recognised in other comprehensive income at the transition date to apply paragraph 91(a) in future periods. The entity is permitted to determine that cumulative amount either by applying paragraph C19(b) or: (i) as nil, unless (ii) applies; and (ii) for insurance contracts with direct participation features to which paragraph B134 applies, as equal to the cumulative amount recognised in other comprehensive income on the underlying items. C19 For groups of insurance contracts that do not include contracts issued more ....
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.... the liability for remaining coverage at the transition date as the difference between the fair value of a group of insurance contracts at that date and the fulfilment cash flows measured at that date. In determining that fair value, an entity shall not apply paragraph 47 of Ind AS 113, Fair Value Measurement (relating to demand features). C20A For a group of reinsurance contracts held to which paragraphs 66A-66B apply (without the need to meet the condition set out in paragraph B119C), an entity shall determine the loss-recovery component of the asset for remaining coverage at the transition date by multiplying: (a) the loss component of the liability for remaining coverage for the underlying insurance contracts at the transition date (see paragraphs C16 and C20); and (b) the percentage of claims for the underlying insurance contracts the entity expects to recover from the group of reinsurance contracts held. C20B Applying paragraphs 14‒22, at the transition date an entity might include in an onerous group of insurance contracts both onerous insurance contracts covered by a group of reinsurance contracts held and onerous insurance contracts not covered by the group o....
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....ntity chooses to disaggregate insurance finance income or expenses between profit or loss and other comprehensive income, it is permitted to determine the cumulative amount of insurance finance income or expenses recognised in other comprehensive income at the transition date: (a) retrospectively--but only if it has reasonable and supportable information to do so; or (b) as nil--unless (c) applies; and (c) for insurance contracts with direct participation features to which paragraph B134 applies--as equal to the cumulative amount recognised in other comprehensive income from the underlying items. Asset for insurance acquisition cash flows C24A In applying the fair value approach for an asset for insurance acquisition cash flows (see paragraph C5B(b)), at the transition date, an entity shall determine an asset for insurance acquisition cash flows at an amount equal to the insurance acquisition cash flows the entity would incur at the transition date for the rights to obtain: (a) recoveries of insurance acquisition cash flows from premiums of insurance contracts issued before the transition date but not recognised at the transition date; (b) future insurance contracts ....
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....stated for Ind AS 109 where the entity restates prior periods but the financial asset has been derecognised during those prior periods (see paragraph 7.2.1 of Ind AS 109). C28B An entity applying the classification overlay to a financial asset shall present comparative information as if the classification and measurement requirements of Ind AS 109 had been applied to that financial asset. The entity shall use reasonable and supportable information available at the transition date (see paragraph C2(b)) to determine how the entity expects the financial asset would be classified and measured on initial application of Ind AS 109 (for example, an entity might use preliminary assessments performed to prepare for the initial application of Ind AS 109). C28C In applying the classification overlay to a financial asset, an entity is not required to apply the impairment requirements in Section 5.5 of Ind AS 109. If, based on the classification determined applying paragraph C28B, the financial asset would be subject to the impairment requirements in Section 5.5 of Ind AS 109 but the entity does not apply those requirements in applying the classification overlay, the entity shall continue t....
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....f Ind AS 109 is met. (d) may designate an investment in an equity instrument as at fair value through other comprehensive income applying paragraph 5.7.5 of Ind AS 109. (e) may revoke its previous designation of an investment in an equity instrument as at fair value through other comprehensive income applying paragraph 5.7.5 of Ind AS 109. C30 An entity shall apply paragraph C29 on the basis of the facts and circumstances that exist at the date of initial application of Ind AS 117. An entity shall apply those designations and classifications retrospectively. In doing so, the entity shall apply the relevant transition requirements in Ind AS 109. The date of initial application for that purpose shall be deemed to be the date of initial application of Ind AS 117. C31 An entity that applies paragraph C29 is not required to restate prior periods to reflect such changes in designations or classifications. The entity may restate prior periods only if it is possible without the use of hindsight. If an entity restates prior periods, the restated financial statements must reflect all the requirements of Ind AS 109 for those affected financial assets. If an entity does not restate pri....
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....urance Contracts. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 117 and the corresponding International Financial Reporting Standard (IFRS) 17, Insurance Contracts, issued by the International Accounting Standards Board. Comparison with IFRS 17, Insurance Contracts 1. IFRS 17, Insurance Contracts, is applicable globally with effect from 1st January 2023. In India, it shall be applicable with effect from 1st April 2024. In case of insurance companies, early application of the said standard will be permitted for consolidation purposes only. 2. Paragraph 7(b) of IFRS 17 mentions that this standard shall not be applicable to retirement benefit obligations reported by defined benefit retirement plans and reference to IAS 26, Accounting and Reporting by Retirement Benefit Plans, has been made. Though this scope exclusion is retained but reference to IAS 26 has been omitted in Ind AS 117 considering Ind AS corresponding to IAS 26 has not been notified in India. 3. Paragraph 27 appears as 'Deleted' in IFRS 17. In orde....
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....ollowing item shall be inserted, namely: -- "(da) portfolios of contracts within the scope of Ind AS 117 that are assets, disaggregated as required by paragraph 78 of Ind AS 117;" (b) after item (m), the following item shall be inserted, namely: -- "(ma) portfolios of contracts within the scope of Ind AS 117 that are liabilities, disaggregated as required by paragraph 78 of Ind AS 117;" (iii) in paragraph 82, -- (a) for item (a), the following item shall be substituted, namely: -- "(a) revenue, presenting separately; (i) interest revenue calculated using the effective interest method; and (ii) insurance revenue (see Ind AS 117);" (b) after item (aa), the following items shall be inserted, namely: -- "(ab) insurance service expenses from contracts issued within the scope of Ind AS 117 (see Ind AS 117); (ac) income or expenses from reinsurance contracts held (see Ind AS 117);" (c) after item (ba), the following items shall be inserted, namely: -- "(bb) insurance finance income or expenses from contracts issued within the scope of Ind AS 117 (see Ind AS 117); (bc) finance income or expenses from reinsurance contracts held (see Ind AS 117);" (iv) ....
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....g investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with Ind AS 109. An example of an investment-linked insurance fund is a fund held by an entity as the underlying items for a group of insurance contracts with direct participation features. For the purposes of this election, insurance contracts include investment contracts with discretionary participation features. An entity shall make this election separately for each associate or joint venture, at initial recognition of the associate or joint venture. (See Ind AS 117, Insurance Contracts, for terms used in this paragraph that are defined in that Standard.)" (ii) for paragraph 45F, the following paragraph shall be substituted, namely: -- "45F Ind AS 117 amended paragraph 18. An entity shall apply that amendment when it applies Ind AS 117." (iii) in Appendix 1, for paragraph 6, the following paragraph shall be substituted, namely: -- "6. Paragraph 45J of IAS 28 related to temporary exemption from IFRS 9 in accordance with IFRS 4, Insurance Contracts, has not been included in Ind AS 28 since the said exemption has not been given under Ind AS....
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....financial liabilities for the amounts to be paid to those investors. Similarly, some entities issue groups of insurance contracts with direct participation features and those entities hold the underlying items. Some such funds or underlying items include the entity's treasury shares. Despite paragraph 33, an entity may elect not to deduct from equity a treasury share that is included in such a fund or is an underlying item when, and only when, an entity reacquires its own equity instrument for such purposes. Instead, the entity may elect to continue to account for that treasury share as equity and to account for the reacquired instrument as if the instrument were a financial asset and measure it at fair value through profit or loss in accordance with Ind AS 109. That election is irrevocable and made on an instrument-by-instrument basis. For the purposes of this election, insurance contracts include investment contracts with discretionary participation features. (See Ind AS 117 for terms used in this paragraph that are defined in that Standard.) " (iii) after paragraph 97S, the following paragraph shall be inserted, namely: -- "97T Ind AS 117 amended paragraphs 4, AG8 and AG36, ....