TaxTMI 
TaxTMI 
Companies (Indian Accounting Standards) Amendment Rules, 2024.
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....aragraphs B1 and D1, deleted the heading before paragraph 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 numbe....
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....graph 31, the following paragraph shall be inserted, namely: - "Insurance contracts 31A The acquirer shall measure a group of contracts within the scope of Ind AS 117, Insurance Contracts, acquired in a business combination, and any assets for insurance acquisition cash flows as defined in Ind AS 117, as a liability or asset in accordance 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 ac....
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....AS 105." (b) after paragraph 5, the following paragraph shall be inserted, namely: - "6. Paragraphs 44-44L of IFRS 5 related to effective date have not been included in Ind AS 105 as these are not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IFRS 5, these paragraph numbers are retained in Ind AS 105". (E) in "Indian Accounting Standard (Ind AS) 107", - (i) in paragraph 3, for item (d), the following item shall be substituted, namely: - "(d) insurance contracts as defined in Ind AS 117, Insurance Contracts or investment contracts 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 arisi....
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....uted, namely: - "44DD Ind AS 117 amended paragraphs 3, 8 and 29 and deleted paragraph 30. An entity shall apply those amendments when it applies Ind AS 117." (vi) in Appendix 1, in paragraph 4, for items (xi) to (xvi), the following items shall be substituted, namely: - "(xi) paragraph 29 (b) and (c) (xii) paragraph 30 (xiii) paragraph 36 (c) and (d) (xiv) paragraph 37 (xv) paragraph B4 of Appendix B (xvi) paragraph B5 (b), (d), (f) and (g) (xvii) paragraphs B12-B16 of Appendix B" (vii) for paragraph 5, the following paragraph shall be substituted, namely: - "5. Paragraphs 42I-42S of IFRS 7 have not been included in Ind AS 107 as these paragraphs relate to initial application of IFRS 9 which are not relevant in Indian 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....
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....(ii) after paragraph 3.3.4, the following paragraph shall be inserted, namely: - "3.3.5 Some entities operate, either internally or externally, an investment fund that provides investors with benefits determined by units in the fund and recognise 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 financial liability (for example, a corporate bond issued). Despite the other requirements in this Standard for the derecognition of financial liabilities, an entity may elect not to derecognise its financial liability that is included in such a fund or is an underlying item when, and only when, the entity repurchases its financial liability for such purposes. Instead, the entity may elect to continue to account for 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....
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....e amendments. That classification shall be applied retrospectively. 7.2.40 An entity is not required to restate prior periods to reflect the application of these amendments. The entity may restate prior periods only if it is possible to do so without the use of hindsight. If an entity restates prior periods, the restated financial statements must reflect all the requirements in this Standard for the affected financial instruments. If an entity does not restate prior periods, the entity shall recognise any difference between the previous carrying amount and the carrying amount at the beginning of the annual reporting period that includes the date of initial application of these amendments in the opening retained earnings (or other component of equity, as appropriate) of the annual reporting period that includes the date of initial application of these amendments. 7.2.41 In the reporting period that includes the date of initial application of these amendments, an entity is not required to present the quantitative 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 amendme....
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....he amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 115 [see paragraph 4.2.1(c)]. (b) Some credit-related guarantees do not, as a precondition for payment, require that the holder is exposed to, and has incurred a loss on, the failure of the debtor to make payments on the guaranteed asset when due. An example of such a guarantee is one that requires payments in response to changes in a specified credit rating or credit index. Such guarantees are not financial guarantee contracts as defined in this Standard, and are not insurance contracts as defined in Ind AS 117. Such guarantees are derivatives and the issuer applies this Standard to them." (vii) in paragraph B4.1.30, for item (a), the following item shall be substituted, namely: - "(a) an entity has contracts within the scope of Ind AS 117 (the measurement of which incorporates current information) and financial assets that it considers to be related and that would otherwise be measured at either fair value through other comprehensive income or amortised cost." (viii) in Appendix 1, - ....
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....rceability of the rights and obligations in a contract is a matter of law. Contracts can be written, oral or implied by an entity's customary business practices. Contractual terms include all terms in a contract, explicit or implied, but an entity shall disregard terms that have no commercial substance (ie no discernible effect on the economics of the contract). Implied terms in a contract include those imposed by law or regulation. The practices and processes for establishing contracts with customers vary across legal jurisdictions, industries and entities. In addition, they may vary within an entity (for example, they may depend on the class of customer or the nature of the promised goods or services). Scope 3. An entity shall apply Ind AS 117 to: (a) insurance contracts, including reinsurance contracts, it issues; (b) reinsurance contracts it holds; and (c) investment contracts with discretionary participation features it issues, provided the entity also issues insurance contracts. 4. All references in Ind AS 117 to insurance contracts also apply to: (a) reinsurance contracts held, except: (i) for references....
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....less those contracts are reinsurance contracts held (see paragraph 3(b)). (h) credit card contracts, or similar contracts that provide credit or payment arrangements, that meet the definition of an insurance contract if, and only if, the entity does not reflect an assessment of the insurance risk associated with an individual customer in setting the price of the contract with that customer (see Ind AS 109 and other applicable Ind AS). However, if, and only if, Ind AS 109 requires an entity to separate an insurance coverage component (see paragraph 2.1(e)(iv) of Ind AS 109) that is embedded in such a contract, the entity shall apply Ind AS 117 to that component. 8. Some contracts meet the definition of an insurance contract but have as their primary purpose the provision of services for a fixed fee. An entity may choose to apply Ind AS 115 instead of Ind AS 117 to such contracts that it issues if, and only if, specified conditions are met. The entity may make that choice contract by contract, but the choice for each contract is irrevocable. The conditions are: (a) the entity does not reflect an assessment of the risk associated with an individual customer ....
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.... investment component unless it is an investment contract with discretionary participation features within the scope of Ind AS 117 (see paragraph 3(c)). 12. After applying paragraph 11 to separate any cash flows related to embedded derivatives and distinct investment components, an entity shall separate from the host insurance contract any promise to transfer to a policyholder distinct goods or services other than insurance contract services, applying paragraph 7 of Ind AS 115. The entity shall account for such promises applying Ind AS 115. In applying paragraph 7 of Ind AS 115 to separate the promise, the entity shall apply paragraphs B33-B35 of Ind AS 117 and, on initial recognition, shall: (a) apply Ind AS 115 to attribute the cash inflows between the insurance component and any promises to provide distinct goods or services other than insurance contract services; and (b) attribute the cash outflows between the insurance component and any promised goods or services other than insurance contract services, accounted for applying Ind AS 115 so that: (i) cash outflows that relate directly to each component are attributed to that component; and ....
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....ntracts belong by considering individual contracts. 18. For contracts issued to which an entity applies the premium allocation approach (see paragraphs 53-59), the entity shall assume no contracts in the portfolio are onerous at initial recognition, unless facts and circumstances indicate otherwise. An entity shall assess whether contracts that are not onerous at initial recognition have no significant possibility of becoming onerous subsequently by assessing the likelihood of changes in applicable facts and circumstances. 19. For contracts issued to which an entity does not apply the premium allocation approach (see paragraphs 53- 54), an entity shall assess whether contracts that are not onerous at initial recognition have no significant possibility of becoming onerous: (a) based on the likelihood of changes in assumptions which, if they occurred, would result in the contracts becoming onerous. (b) using information about estimates provided by the entity's internal reporting. Hence, in assessing whether contracts that are not onerous at initial recognition have no significant possibility of becoming onerous: (i) an entity shall not dis....
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....ragraphs 32(a), 40(a)(i) and 40(b), by allocating such estimates to groups of contracts. Recognition 25. An entity shall recognise a group of insurance contracts it issues from the earliest of the following: (a) the beginning of the coverage period of the group of contracts; (b) the date when the first payment from a policyholder in the group becomes due; and (c) for a group of onerous contracts, when the group becomes onerous. 26. If there is no contractual due date, the first payment from the policyholder is deemed to be due when it is received. An entity is required to determine whether any contracts form a group of onerous contracts applying paragraph 16 before the earlier of the dates set out in paragraphs 25(a) and 25(b) if facts and circumstances indicate there is such a group. 27. [Refer Appendix 1] 28. In recognising a group of insurance contracts in a reporting period, an entity shall include only contracts that individually meet one of the criteria set out in paragraph 25 and shall make estimates for the discount rates at the date of initial recognition (see paragraph B73) and the coverag....
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....B36-B119F) 29. An entity shall apply paragraphs 30-52 to all groups of insurance contracts within the scope of Ind AS 117, with the following exceptions: (a) for groups of insurance contracts meeting either of the criteria specified in paragraph 53, an entity may simplify the measurement of the group using the premium allocation approach in paragraphs 55-59. (b) for groups of reinsurance contracts held, an entity shall apply paragraphs 32- 46 as required by paragraphs 63-70A. Paragraph 45 (on insurance contracts with direct participation features) and paragraphs 47-52 (on onerous contracts) do not apply to groups of reinsurance contracts held. (c) for groups of investment contracts with discretionary participation features, an entity shall apply paragraphs 32-52 as modified by paragraph 71. 30. When applying Ind AS 21, The Effects of Changes in Foreign Exchange Rates to a group of insurance contracts that generate cash flows in a foreign currency, an entity shall treat the group of contracts, including the contractual service margin, as a monetary item. 31. In the financial statements of an entity that issues insurance contracts....
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....paragraph B46). 34. Cash flows are within the boundary of an insurance contract if they arise from substantive rights and obligations that exist during the reporting period in which the entity can compel the policyholder to pay the premiums or in which the entity has a substantive obligation to provide the policyholder with insurance contract services (see paragraphs B61-B71). A substantive obligation to provide insurance contract services ends when: (a) the entity has the practical ability to reassess the risks of the particular policyholder and, as a result, can set a price or level of benefits that fully reflects those risks; or (b) both of the following criteria are satisfied: (i) the entity has the practical ability to reassess the risks of the portfolio of insurance contracts that contains the contract and, as a result, can set a price or level of benefits that fully reflects the risk of that portfolio; and (ii) the pricing of the premiums up to the date when the risks are reassessed does not take into account the risks that relate to periods after the reassessment date. 35. An entity shall not recognise as a liability or ....
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....and (ii) any other asset or liability previously recognised for cash flows related to the group of contracts as specified in paragraph B66A. 39. For insurance contracts acquired in a transfer of insurance contracts or in a business combination within the scope of Ind AS 103, an entity shall apply paragraph 38 in accordance with paragraphs B93- B95F. Subsequent measurement 40. The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of: (a) the liability for remaining coverage comprising: (i) the fulfilment cash flows related to future service allocated to the group at that date, measured applying paragraphs 33-37 and B36- B92; (ii) the contractual service margin of the group at that date, measured applying paragraphs 43-46; and (b) the liability for incurred claims, comprising the fulfilment cash flows related to past service allocated to the group at that date, measured applying paragraphs 33-37 and B36-B92. 41. An entity shall recognise income and expenses for the following changes in the carrying amount of the liability for remaining coverage: ....
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....aph 50(b). (d) the effect of any currency exchange differences on the contractual service margin; and (e) the amount recognised as insurance revenue because of the transfer of insurance contract services 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. 45. For insurance contracts with direct participation features (see paragraphs B101- B118), 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 the amounts specified in subparagraphs (a)-(e) below. An entity is not required to identify these adjustments separately. Instead, a combined amount may be determined for some, or all, of the adjustments. The adjustments are: (a) the effect of any new contracts added to the group (see paragraph 28); (b) the change in the amount of the entity's share of the fair value of the underlying items (see paragraph B104(b)(i)), except to the extent that: ....
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....a set of contracts rather than individual contracts. An entity shall recognise a loss in profit or loss for the net outflow for the group of onerous contracts, resulting in the carrying amount of the liability for the group being equal to the fulfilment cash flows and the contractual service margin of the group being zero. 48. A group of insurance contracts becomes onerous (or more onerous) on subsequent measurement if the following amounts exceed the carrying amount of the contractual service margin: (a) unfavourable changes relating to future service in the fulfilment cash flows allocated to the group arising from changes in estimates of future cash flows and the risk adjustment for non-financial risk; and (b) for a group of insurance contracts with direct participation features, the decrease in the amount of the entity's share of the fair value of the underlying items. Applying paragraphs 44(c)(i), 45(b)(ii) and 45(c)(ii), an entity shall recognise a loss in profit or loss to the extent of that excess. 49. An entity shall establish (or increase) a loss component of the liability for remaining coverage for an onerous group depict....
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....roduce a measurement of the liability for remaining coverage for the group that would not differ materially from the one that would be produced applying the requirements in paragraphs 32-52; or (b) the coverage period of each contract in the group (including insurance contract services arising from all premiums within the contract boundary determined at that date applying paragraph 34) is one year or less. 54. The criterion in paragraph 53(a) is not met if at the inception of the group an entity expects significant variability in the fulfilment cash flows that would affect the measurement of the liability for remaining coverage during the period before a claim is incurred. Variability in the fulfilment cash flows increases with, for example: (a) the extent of future cash flows relating to any derivatives embedded in the contracts; and (b) the length of the coverage period of the group of contracts. 55. Using the premium allocation approach, an entity shall measure the liability for remaining coverage as follows: (a) on initial recognition, the carrying amount of the liability is: (i) the premiums, if any, received....
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....d (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, it shall not include in the fulfilment cash flows any such adjustment. 58. To the extent that the fulfilment cash flows described in paragraph 57(b) exceed the carrying amount described in paragraph 57(a), the entity shall recognise a loss in profit or loss and increase the liability for remaining coverage. 59. In applying the premium allocation approach, an entity: (a) may choose to recognise any insurance acquisition cash flows as expenses when it incurs those costs, provided that the coverage period of each contract in the group at initial recognition is no more than one year. (b) shall measure the liability for incurred claims for the group of insurance contracts at the fulfilment cash flows relating to incurred claims, applying paragraphs 33-37 and B36-B92. However, the entity is not required to adjust future cash flows for the time value of money and th....
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....agraph 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 contracts held there is no unearned profit but instead a net cost or net gain on purchasing the reinsurance. Hence, unless paragraph 65A applies, on initial recognition the entity shall recognise any net cost or net gain on purchasing the group of reinsurance contracts held as a contractual service margin measured at an amount equal to the sum of: (a) the fulfilment cash flows; (b) the amount derecognised at that date of any asset or liability previously recognised for cash flows related to the group of reinsurance contracts held; (c) any cash flows arising at that date; and (d) any income recognised in profit or loss applying paragraph 66A. 65A If the net cost of purchasing reinsurance coverage rel....
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....ddition 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 paragraph B119F). 67. Changes in the fulfilment cash flows that result from changes in the risk of non-performance by the issuer of a reinsurance contract held do not relate to future service and shall not adjust the contractual service margin. 68. Reinsurance contracts held cannot be onerous. Accordingly, the requirements of paragraphs 47-52 do not apply. Premium allocation approach for reinsurance contracts held 69. An entity may use the premium allocation approach set out in paragraphs 55-56 and 59 (adapted to reflect the features of reinsurance contra....
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....ks. (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 the conditions in (a)-(c) are satisfied. The exercise of a right included in the terms of a contract is not a modification. The conditions are that: (a) if the modified terms had been included at contract inception: (i) the modified contract would have been excluded from the scope of Ind AS 117, applying paragraphs 3-8A; (ii) an entity would have separated different components from the host insurance contract applying paragraphs 10-13, ....
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....its 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 change in the carrying amount of the group of insurance contracts resulting from the derecognition of the contract, applying paragraph 76(a). (ii) the premium charged by the third party. (iii) the premium the entity would have charged had it entered into a contract with equivalent terms as the new contract at the ....
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....es. 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 presents separately the amounts recovered from the reinsurer and an allocation of the premiums paid, it shall: (a) treat reinsurance cash flows that are contingent on claims....
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....it 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) any remaining amounts for t....
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....f aggregation bases that might 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 ....
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....disclose in the reconciliations required in paragraph 100 each of the following amounts related to services, if applicable: (a) insurance revenue. (b) insurance service expenses, showing separately: (i) incurred 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 estima....
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....surance contracts issued other than those to which the premium allocation approach described in paragraphs 53-59 has been applied, an entity shall disclose an analysis of the insurance revenue recognised in the period comprising: (a) the amounts relating to the changes in the liability for remaining coverage as specified in paragraph B124, separately disclosing: (i) the insurance service expenses incurred during 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 a....
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.... disclose the effect of that choice on the adjustment to the contractual service margin in the current period. 113. For contracts with direct participation features, if an entity changes the basis of disaggregation of insurance finance income or expenses between profit or loss and other comprehensive income, applying paragraph B135, it shall disclose, in the period when the change in approach occurred: (a) the reason why the entity was required to change the basis of disaggregation; (b) the amount of any adjustment for each financial statement line item affected; 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 contract....
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....ation about those inputs. (b) any changes in the methods and processes for estimating inputs used to measure contracts, the reason for each change, and the type of contracts affected. (c) to the extent not covered in (a), the approach used: (i) to distinguish changes in estimates of future cash flows arising from the exercise of discretion from other changes in estimates of future cash flows for contracts without direct participation features (see paragraph B98); (ii) to determine the risk adjustment for non-financial risk, including whether changes in the risk adjustment for non-financial risk are disaggregated into an insurance service component and 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 ins....
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....hanges in (a) or (b) from the previous period. 125. For each type of risk arising from contracts within the scope of Ind AS 117, an entity shall disclose: (a) summary quantitative information about its exposure to that risk at the end of the reporting period. This disclosure shall be based on the information provided internally to the entity's key management personnel. (b) the disclosures required by paragraphs 127-132, to the extent not provided applying (a) of this paragraph. 126. An entity shall disclose information about the effect of the regulatory frameworks in which it operates; for example, minimum capital requirements or required interest-rate guarantees. If an entity applies paragraph 20 in determining the groups of insurance contracts to which it applies the recognition 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 character....
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....lose actual claims compared with previous estimates of the undiscounted amount of the claims (ie claims development). The disclosure about claims development shall start with the period when the earliest material claim(s) arose and for which there is still uncertainty about the amount and timing of the claims payments at the end of the reporting period; but the disclosure is not required to start more than 10 years before the end of the reporting period. The entity is not required to disclose information about the development of claims for which uncertainty about the amount and timing of the claims payments is typically resolved within one year. An entity shall reconcile the disclosure about claims development with the aggregate carrying amount of the groups of insurance contracts, which the entity discloses applying paragraph 100(c). Credit risk-other information 131. For credit risk that arises 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 ....
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....urance acquisition expenses)-the estimate at the beginning of the period of the amounts expected to be incurred in the period and the actual amounts incurred in the period. financial risk The risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, currency exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. fulfilment cash flows An explicit, unbiased and probability-weighted estimate (ie expected value) of the present value of the future cash outflows minus the present value of the future cash inflows that will arise as the entity fulfils insurance contracts, including a risk adjustment for non-financial risk. group of insurance contracts A set of insurance contracts resulting from the division of a portfolio of insurance contracts into, at a minimum, contracts issued within a period of no longer than one year and that, at initial recognition: (a) are onerous, if any; (b) ....
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.... covered by an insurance contract that creates insurance risk. investment component The amounts that an insurance contract requires the entity to repay to a policyholder in all circumstances, regardless of whether an insured event occurs. investment contract with discretionary A financial instrument that provides a particular investor with the contractual right to receive, as a supplement to an amount not subject to the discretion of the issuer, participation features additional amounts: (a) that are expected to be a significant portion of the total contractual benefits; (b) the timing or amount of which are contractually at the discretion of the issuer; and (c) that are contractually based on: (i) the returns on a specified pool of contracts or a specified type of contract; (ii) realised and/or unrealised investment returns on a specified pool of assets held by the issuer; or (iii) the profit or loss of the entity or fund that issues the contract. liability for incurred claims An entity's obligation to: (a) investigate and pay val....
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....urance Contracts. B1 This appendix provides guidance on the following: (a) definition of an insurance contract (see paragraphs B2-B30); (b) separation of components from an insurance contract (see paragraphs B31- B35); (ba) asset for insurance acquisition cash flows (see paragraphs B35A-B35D); (c) measurement (see paragraphs B36-B119F); (d) insurance revenue (see paragraphs B120-B127); (e) insurance finance income or expenses (see paragraphs B128-B136); and (f) interim financial statements (see paragraph B137). Definition of an insurance contract (Appendix A) B2 This section provides guidance on the definition of an insurance contract as specified in Appendix A. It addresses the following: (a) uncertain future event (see paragraphs B3-B5); (b) payments in kind (see paragraph B6); (c) the distinction between insurance risk and other risks (see paragraphs B7- B16); (d) significant insurance risk (see paragraphs B17-B23); (e) changes in the level of insurance risk (see paragraphs B24-B25); and (f) e....
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....he holder of a contract to the issuer'. A contract that exposes the issuer to financial risk without significant insurance risk is not an insurance contract. B8 The definition of financial risk in Appendix A refers to financial and non-financial variables. Examples of non-financial variables not specific to a party to the contract include an index of earthquake losses in a particular region or temperatures in a particular city. Financial risk excludes risk from non-financial variables that are specific to a party to the contract, such as the occurrence or non-occurrence of a fire that damages or destroys an asset of that party. Furthermore, the risk of changes in the fair value of a nonfinancial asset is not a financial risk if the fair value reflects changes in the market prices for such assets (ie a financial variable) and the condition of a specific non-financial asset held by a party to a contract (ie a non-financial variable). For example, if a guarantee of the residual value of a specific car in which the policyholder has an insurable interest exposes the guarantor to the risk of changes in the car's physical condition, that risk is insurance risk, not financia....
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....ect on the policyholder as a precondition for the payment. This type of contract is not an insurance contract even if the holder uses it to mitigate an underlying risk exposure. For example, if the holder uses a derivative to hedge an underlying financial or non-financial variable correlated with the cash flows from an asset of the entity, the derivative is not an insurance contract because the payment is not conditional on whether the holder is adversely affected by a reduction in the cash flows from the asset. The definition of an insurance contract refers to an uncertain future event for which an adverse effect on the policyholder is a contractual precondition for payment. A contractual precondition does not require the entity to investigate whether the event actually caused an adverse effect, but it does permit the entity to deny the payment if it is not satisfied that the event did cause an adverse effect. B14 Lapse or persistency risk (the risk that the policyholder will cancel the contract earlier or later than the issuer had expected when pricing the contract) is not insurance risk because the resulting variability in the payment to the policyholder is not co....
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....present value basis. However, even if a reinsurance contract does not expose the issuer to the possibility of a significant loss, that contract is deemed to transfer significant insurance risk if it transfers to the reinsurer substantially all the insurance risk relating to the reinsured portions of the underlying insurance contracts. B20 The additional amounts described in paragraph B18 are determined on a present-value basis. If an insurance contract requires payment when an event with uncertain timing occurs and if the payment is not adjusted for the time value of money, there may be scenarios in which the present value of the payment increases, even if its nominal value is fixed. An example is insurance that provides a fixed death benefit when the policyholder dies, with no expiry date for the cover (often referred to as whole-life insurance for a fixed amount). It is certain that the policyholder will die, but the date of death is uncertain. Payments may be made when an individual policyholder dies earlier than expected. Because those payments are not adjusted for the time value of money, significant insurance risk could exist even if there is no overall loss on....
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....ese separately. B22 An entity shall assess the significance of insurance risk contract by contract. Consequently, the insurance risk can be significant even if there is minimal probability of significant losses for a portfolio or group of contracts. B23 It follows from paragraphs B18-B22 that, if a contract pays a death benefit that exceeds the amount payable on survival, the contract is an insurance contract unless the additional death benefit is not significant (judged by reference to the contract itself rather than to an entire portfolio of contracts). As noted in paragraph B21(b), the waiver on death of cancellation or surrender charges is not included in this assessment if that waiver does not compensate the policyholder for a pre-existing risk. Similarly, an annuity contract that pays out regular sums for the rest of a policyholder's life is an insurance contract, unless the aggregate life-contingent payments are insignificant. Changes in the level of insurance risk B24 For some contracts, the transfer of insurance risk to the issuer occurs after a period of time. For example, consider a contract that provides a spec....
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....reported by defined benefit retirement plans are outside the scope of Ind AS 117, applying paragraph 7(b)). (e) insurance against disability and medical costs. (f) surety bonds, fidelity bonds, performance bonds and bid bonds, ie contracts that compensate the holder if another party fails to perform a contractual obligation; for example, an obligation to construct a building. (g) product warranties. Product warranties issued by another party for goods sold by a manufacturer, dealer or retailer are within the scope of Ind AS 117. However, product warranties issued directly by a manufacturer, dealer or retailer are outside the scope of Ind AS 117 applying paragraph 7(a), and are instead within the scope of Ind AS 115 or Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets. (h) title insurance (insurance against the discovery of defects in the title to land or buildings that were not apparent when the insurance contract was issued). In this case, the insured event is the discovery of a defect in the title, not the defect itself. (i) travel insurance (compensation in cash or in kind to policyholders for losses suffered in adva....
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....ncertain future event occurs, but do not require, as a contractual precondition for payment, the event to adversely affect the policyholder. However, this does not exclude from the definition of an insurance contract contracts that specify a predetermined payout to quantify the loss caused by a specified event such as a death or an accident (see paragraph B12). (e) derivatives that expose a party to financial risk but not insurance risk, because the derivatives require that party to make (or give them the right to receive) payment solely based on the changes in one or more of a specified interest rate, a financial instrument price, a commodity price, a foreign exchange rate, an index of prices or rates, a credit rating or a credit index or any other variable, provided that, in the case of a non-financial variable, the variable is not specific to a party to the contract. (f) credit-related guarantees that require payments even if the holder has not incurred a loss on the failure of the debtor to make payments when due; such contracts are accounted for applying Ind AS 109, Financial Instruments (see paragraph B29). (g) contracts that requi....
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....ighly interrelated. (b) a contract with equivalent terms is sold, or could be sold, separately in the same market or the same jurisdiction, either by entities that issue insurance contracts or by other parties. The entity shall take into account all information reasonably available in making this determination. The entity is not required to undertake an exhaustive search to identify whether an investment component is sold separately. B32 An investment component and an insurance component are highly interrelated if, and only if: (a) the entity is unable to measure one component without considering the other. Thus, if the value of one component varies according to the value of the other, an entity shall apply Ind AS 117 to account for the combined investment and insurance component; or (b) the policyholder is unable to benefit from one component unless the other is also present. Thus, if the lapse or maturity of one component in a contract causes the lapse or maturity of the other, the entity shall apply Ind AS 117 to account for the combined investment component and insurance component. Promises to transfer distinct goods or service....
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....ted 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 insurance contracts across more than one reporting period (see paragraph 28). In those circumstances, an entity shall derecognise the portion of an asset for insurance acquisition cash flows that relates to insurance contracts added to the group in that period and continue to recognise an asset for insurance acquisition cash flows to the extent that the asset relates to insurance contracts expected to be added to the group in a future reporting period. B35D To apply paragraph 28E: (a) an entity shall recognise an impairment loss in profit or loss and reduce the carrying amount of an asset for insurance acquisition cash flows so that the carrying amount of the asset does not exceed the expected net cash inflow for the related group of insurance contracts, determined applying paragraph 32(a). (b....
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....sh 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 the mean. For example, if an entity estimates that the probability distribution of outcomes is broadly consistent with a probability distribution that can be described completely with a small number of parameters, it will be sufficient to estimate the smaller number of parameters. Similarly, in some cases, relatively simple modelling may give an answer within an acceptable range of precision, without the need for many detailed simulations. However, in some cases, the cash flows may be driven by complex underlying factors and may respond in a non-linear fashion to changes in economic conditions. This may happen if, for example, the cash flows reflect a series of interrelated options ....
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....es-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 (paragraph 33(b)) B44 Estimates of market variables shall be consistent with observable market prices at the measurement date. An entity shall maximise the use of observable inputs and shall not substitute its own estimates for observable market data except as described in paragraph 79 of Ind AS 113, Fair Value Measurement. Consistent with Ind AS 113, if variables need to be derived (for example, because no observable market variables exist) they shall be as consistent as possible with observable market variables. B45 Market prices b....
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....out 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 persuasive information. For example: (a) internal mortality statistics may be more persuasive than national mortality data if national data is derived from a large population that is not representative of the insured population. This might be because, for example, the demographic characteristics of the insured population could significantly differ from those of the national population, meaning that an entity would need to place more weight on the internal data a....
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....as 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 existed at that date. For example, there may be a 20 per cent probability at the end of the reporting period that a major storm will strike during the remaining six months of an insurance contract. After the end of the reporting period but before the financial statements are authorised for issue, a major storm strikes. The fulfilment cash flows under that contra....
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....ation 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) B61 Estimates of cash flows in a scenario shall include all cash flows within the boundary of an existing contract and no other cash flows. An entity shall apply paragraph 2 in determining the boundary of an existing contract....
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....ther 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 paid (ie reported claims), incurred claims for events that have occurred but for which claims have not been reported and all future c....
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....turn 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 (paym....
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....e insurance contracts affect the cash flows to policyholders of other contracts by requiring: (a) the policyholder to share with policyholders of other contracts the returns 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 f....
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....ual service margin applying paragraphs B96(a)-B96(b) and B96(d) for insurance contracts without direct participation features-discount rates applying paragraph 36 determined on initial recognition; (d) for groups of contracts applying the premium allocation approach that have a significant financing component, to 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 ch....
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....t that are subject to a guarantee of a minimum return, do not vary solely based on the returns on the underlying items, even when the guaranteed amount is lower than the expected return on the underlying items. Hence, an entity shall adjust the rate that reflects the variability of the returns on the underlying items for the effect of the guarantee, even when the guaranteed amount is lower than the expected return on the underlying items. 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 ins....
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.... rates observed in the market and the liquidity characteristics of the insurance contracts (a bottom-up approach). B81 Alternatively, an entity may determine the appropriate discount rates for insurance contracts based on a yield curve that reflects the current market rates of return implicit in a fair value measurement of a reference portfolio of assets (a top-down approach). An entity shall adjust that yield curve to eliminate any factors that are not relevant to the insurance contracts, but is not required 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 re....
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....tments would be required to eliminate factors that are not relevant to the insurance contracts when the reference portfolio of assets has similar characteristics. For example, if the cash flows from the insurance contracts do not vary based on the returns on underlying items, fewer adjustments would be required if an entity used debt instruments as a starting point rather than equity instruments. For debt instruments, the objective would be to eliminate from the total bond yield the effect of credit risk and other factors that are not relevant to the insurance contracts. One way to estimate the effect of credit risk is to use 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....
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.... including the risk adjustment for non-financial risk implicitly when determining the estimates of future cash flows or the discount rates. The discount rates that are disclosed to comply with paragraph 120 shall not include any implicit adjustments for non-financial risk. B91 Ind AS 117 does not specify the estimation technique(s) used to determine the risk adjustment for nonfinancial risk. However, to reflect the compensation the entity would require for bearing the non-financial risk, the risk adjustment for non-financial risk shall have the following characteristics: (a) risks with low frequency and high severity will result in higher risk adjustments for non-financial risk than risks with high frequency and low severity; (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 adjustme....
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....nbsp;If acquired insurance contracts issued are onerous, applying paragraph 47, the entity shall recognise the excess of the fulfilment cash flows over the consideration paid or received 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 contracts acquired in a business combination within the scope of Ind AS 103, or as a loss in profit or loss for contracts acquired in a transfer. The entity shall establish a loss component of the liability for remaining coverage for that excess, and apply paragraphs 49-52 to allocate subsequent changes in fulfilment cash flows to that loss component. B95B For a group of reinsurance contracts held to which paragraphs 66A-66B apply, an entity shall determine the loss-recovery component of the asset 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 ....
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.... requires an adjustment to the contractual service margin of a group of insurance contracts for changes in fulfilment cash flows that relate to future service. These changes comprise: (a) experience adjustments arising from premiums received in the period that relate to future service, and related cash flows such as insurance acquisition cash flows and premium-based taxes, measured at the discount rates specified in paragraph B72(c). (b) changes in estimates of the present value of the future cash flows in the liability for remaining coverage, except those described in paragraph B97(a), measured at the discount rates specified in paragraph B72(c). (c) differences between any investment component expected to become payable in the period and the actual investment component that becomes payable in the period. Those differences are determined by comparing (i) the actual investment component that becomes payable in the period with (ii) the payment in the period that was expected at the start of the period plus any insurance finance income or expenses related to that expected payment before it becomes payable. (ca) differe....
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....te, or on returns that vary based on specified asset returns. B99 An entity shall use that specification to distinguish between the effect of changes in assumptions that relate to financial risk on that commitment (which do not adjust the contractual service margin) and the effect of discretionary changes to that commitment (which adjust the contractual service margin). B100 If an entity cannot specify at inception of the contract what it regards as its commitment under the contract and what it regards as discretionary, it shall regard its commitment to be the return implicit in the estimate of the fulfilment cash flows at inception of the contract, updated to reflect current assumptions that relate to financial risk. Changes in the carrying amount of the contractual service margin for insurance contracts with direct participation features (paragraph 45) B101 Insurance contracts with direct participation features are insurance contracts that are substantially investment-related service contracts under which an entity promises an investment return based on underlying items. Hence, they are defined as insurance contracts for which....
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....identified pool of underlying items. However, a clearly identified pool of underlying items does not exist when: (a) an entity can change the underlying items that determine the amount of the entity's obligation with retrospective effect; or (b) there are no underlying items identified, even if the policyholder could be provided with a return that generally reflects the entity's overall performance and expectations, or the performance and expectations of a subset of assets the entity holds. An example of such a return is a crediting rate or dividend payment set at the end of the period to which it relates. In this case, the obligation to the policyholder reflects the crediting rate or dividend amounts the entity has set, and does not reflect identified underlying items. B107 Paragraph B101(b) requires that the entity expects a substantial share of the fair value returns on the underlying items will be paid to the policyholder and paragraph B101(c) requires that 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. An entity shall: ....
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....(paragraph B104(b)(i)) relate to future service and adjust the contractual service margin, applying paragraph 45(b). B113 Changes in the fulfilment cash flows that do not vary based on the returns on underlying items (paragraph B104(b)(ii)) comprise: (a) changes in the fulfilment cash flows other than those specified in (b). An entity shall apply paragraphs B96-B97, consistent with insurance contracts without direct participation features, to determine to what extent they relate to future service and, applying paragraph 45(c), adjust the contractual service margin. All the adjustments are measured using current discount rates. (b) the change in the effect of the time value of money and financial risks not arising from the underlying items; for example, the effect of financial guarantees. These relate to future service and, applying paragraph 45(c), adjust the contractual service margin, except to the extent that paragraph B115 applies. B114 An entity is not required to identify the adjustments to the contractual service margin required by paragraphs B112 and B113 separately. Instead, a combined amount may be determined for some or all....
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....0. B118 If, and only if, any of the conditions in paragraph B116 cease to be met, an entity shall cease to apply paragraph B115 from that date. An entity shall not make any adjustment for changes previously recognised in profit or loss. Recognition of the contractual service margin in profit or loss B119 An amount of the contractual service margin for a group of insurance contracts is recognised in profit or loss in each period to reflect the insurance contract services provided under the group of insurance contracts in that period (see paragraphs 44(e), 45(e) and 66(e)). The amount is determined by: (a) identifying the coverage units in the group. The number of coverage units in a group is the quantity of insurance contract services provided by the contracts in the group, determined by considering for each contract the quantity of the benefits provided under a contract and its expected coverage period. (b) allocating the contractual service margin at the end of the period (before recognising any amounts in profit or loss to reflect the insurance contract services provided in the period) equally to each coverage unit pr....
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....lates to insurance contracts covered by the group of reinsurance contracts held. B119F After an entity has established a loss-recovery component applying paragraph 66B, the entity shall adjust the loss-recovery component to reflect changes in the loss component of an onerous group of underlying insurance contracts (see paragraphs 50-52). The carrying amount of the loss-recovery component shall not exceed the portion of the carrying amount of the loss component of the onerous group of underlying insurance contracts that the entity expects to recover from the group of reinsurance contracts held. Insurance revenue (paragraphs 83 and 85) B120 The total insurance revenue for a group of insurance contracts is the consideration for the contracts, ie the amount of premiums paid to the entity: (a) adjusted for a financing effect; and (b) excluding any investment components. B121 Paragraph 83 requires the amount of insurance revenue recognised in a period to depict the transfer of promised services at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those services....
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....te to services, but for which the entity does not expect consideration, ie increases and decreases in the loss component of the liability for remaining coverage (see paragraphs 47- 52). B123A To the extent that an entity derecognises an asset for cash flows other than insurance acquisition cash flows at the date of initial recognition of a group of insurance contracts (see paragraphs 38(c)(ii) and B66A), it shall recognise insurance revenue and expenses for the amount derecognised at that date. B124 Consequently, insurance revenue for the period can also be analysed as the total of the changes in the liability for remaining coverage in the period that relates to services for which the entity expects to receive consideration. Those changes are: (a) insurance service expenses incurred in the period (measured at the amounts expected at the beginning of the period), excluding: (i) amounts allocated to the loss component of the liability for remaining coverage applying paragraph 51(a); (ii) repayments of investment components; (iii) amounts that relate to transaction-based taxes collected on behalf of third pa....
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....e income or expenses the effect of the time value of money and financial risk and changes therein. For the purposes of Ind AS 117: (a) assumptions about inflation based on an index of prices or rates or on prices of assets with inflation-linked returns are assumptions that relate to financial risk; (b) assumptions about inflation based on an entity's expectation of specific price changes are not assumptions that relate to financial risk; and (c) changes in the measurement of a group of insurance contracts caused by changes in the value of underlying items (excluding additions and withdrawals) are changes arising from the effect of the time value of money and financial risk and changes therein. B129 Paragraphs 88-89 require an entity to make an accounting policy choice as to whether to disaggregate insurance finance income or expenses for the period between profit or loss and other comprehensive income. An entity shall apply its choice of accounting policy to portfolios of insurance contracts. In assessing the appropriate accounting policy for a portfolio of insurance contracts, applying paragraph 13 of Ind AS 8, Accounting Policies, C....
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....allocation for the finance income or expenses arising from the risk adjustment for non-financial risk, if separately disaggregated from other changes in the risk adjustment for nonfinancial risk applying paragraph 81, is determined using an allocation consistent with that used for the allocation for the finance income or expenses arising from the future cash flows. (c) a systematic allocation for the finance income or expenses arising from the contractual service margin is determined: (i) for insurance contracts that do not have direct participation features, using the discount rates specified in paragraph B72(b); and (ii) for insurance contracts with direct participation features, using an allocation consistent with that used for the allocation for the finance income or expenses arising from the future cash flows. B133 In applying the premium allocation approach to insurance contracts described in paragraphs 53-59, an entity may be required, or may choose, to discount the liability for incurred claims. In such cases, it may choose to disaggregate the insurance finance income or expenses applying paragraph 88(b). If the entity makes this ch....
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....t be updated after the date of the change. The effect of accounting estimates made in interim financial statements B137 If an entity prepares interim financial statements applying Ind AS 34, Interim Financial Reporting, the entity shall make an accounting policy choice as to whether to change the treatment of accounting estimates made in previous interim financial statements when applying Ind AS 117 in subsequent interim financial statements and in the annual reporting period. The entity shall apply its choice of accounting policy to all groups of insurance contracts it issues and groups of reinsurance contracts it holds. Appendix C Effective date and transition This appendix is an integral part of Ind AS 117, Insurance Contracts. Effective date C1 An entity shall apply Ind AS 117 for annual reporting periods beginning on or after 1 April 2024. Early adoption is permitted. If an entity applies Ind AS 117 earlier, it shall disclose that fact. However, an Insurance Company is permitted to apply Ind AS 117 early only for consolidation purposes by its parent company. C2 For the purpos....
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....ch 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 from the transition date; and (b) the entity has used derivatives, non-derivative financial instruments measured at fair value through profit or loss, or reinsurance contracts held to mitigate financial risk arising from the group of insurance contracts, as specified in paragraph B115, before the transition date. C5B If, and only if, it is impracticable for an entity to apply paragraph C4(aa) for an asset for insurance acquisition cash flows, the entity shall apply the following approaches to measure the asset for insurance acquisition cash flows: (a) the modified retrospective approach in paragraphs C14B-C14D and C17A, subject to paragraph C6(a); or (b) the fair value approach in paragraphs C24A-C24B. Modified retrospective approach C6 The objective of the modified retrospective approach is to achieve the clo....
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....ity 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 contracts without direct participation features C11 To the extent permitted by paragraph C8, for contracts without direct participation features, an entity shall determine the contractual service margin or loss component of the liability for remaining coverage (see paragraphs 49-52) at the transition date by applying paragraphs C12-C16C. C12 To the extent permitted by paragraph C8, an entity shall estimate the future cash flows at the date of initial recognition of a group of insurance contracts as the amount of the future cash flows at the transition date (or earlier date, if the future cash flows at that earlier date can be determined ret....
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....ate 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 that group, to the extent insurance contracts expected to be in the group have been recognised at that date (see paragraphs 28C and B35C). Other insurance acquisition cash flows paid before the transition date, including those allocated to a group of insurance contracts expected to be recognised after the transition date, are recognised as an asset, applying paragraph 28B. C14D If an entity does not have reasonable and supportable information to apply paragraph C14B, the entity shall determine the following amounts to be nil ....
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....f 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 participation features C17 To the extent permitted by paragraph C8, for contracts with direct participation features an entity shall determine the contractual service margin or loss component of the liability for remaining coverage at the transition date as: (a) the total fair value of the underlying items at that date; minus (b) the fulfilment cash flows at that date; plus ....
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....i) 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 than one year apart: (a) if an entity applies paragraph C13 to estimate the discount rates that applied at initial recognition (or subsequently), it shall also determine the discount rates specified in paragraphs B72(b)-B72(e) applying ....
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....ured 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 of reinsurance contracts held. To apply paragraph C20A in such cases, an entity shall use a systematic and rational basis of allocation to deter....
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....ce 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 ....
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....ation for that financial asset has not been restated for Ind AS 109. Comparative information for a financial asset will not be restated 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 req....
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.... profit or loss if the condition in paragraph 4.1.5 of Ind AS 109 is no longer met because of the application of Ind AS 117. (c) may designate a financial asset as measured at fair value through profit or loss if the condition in paragraph 4.1.5 of 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 ....
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....mation as if paragraph C29 had been applied to that asset. Such an entity shall adapt the requirements of paragraphs C28B-C28E so that the classification overlay is based on how the entity expects the financial asset would be designated applying paragraph C29 at the date of initial application of Ind AS 117. Withdrawal of other Indian Accounting Standards C34 Ind AS 117 supersedes Ind AS 104 Insurance 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 ....
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....Ind AS 117, or by an amount that eliminates accounting mismatches with the finance income or expenses arising on the underlying items, applying paragraph 89(b) of Ind AS 117; and (j) finance income and expenses reinsurance contracts held excluded from profit or loss when total reinsurance finance or expenses is disaggregated to include in profit or loss an amount determined by a systematic allocation applying paragraph 88(b) of Ind AS 117." (ii) in paragraph 54, - (a) after item (d), the following 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) insu....
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....8. 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. Paragraphs 172 to 177 of IAS 19 have not been included as these paragraphs relate to transition and effective date that are not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IAS 19, the paragraph numbers are retained in Ind AS 19". (L) in "Indian Accounting Standard (Ind AS) 28", - (i) for paragraph 18, the following paragraph shall be substituted, namely: - "18. When an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organisation, or a mutual fund, unit trust and similar entities including 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, insura....
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....s, that an entity issues that meet the definition of an insurance contract if the entity applies Ind AS 109 to those rights and obligations in accordance with paragraph 7(h) of Ind AS 117 and paragraph 2.1(e)(iv) of Ind AS 109. (v) an entity's rights and obligations that are financial instruments arising under insurance contracts that an entity issues that limit the compensation for insured events to the amount otherwise required to settle the policyholder's obligation created by the contract if the entity elects, in accordance with paragraph 8A of Ind AS 117, to apply Ind AS 109 instead of Ind AS 117 to such contracts. (e) [Refer Appendix 1]." (ii) after paragraph 33, the following paragraph shall be inserted, namely: - "33A Some entities operate, either internally or externally, an investment fund that provides investors with benefits determined by units in the fund and recognise 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 in....
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....ich they are reacquired. Paragraph 33 requires an entity that reacquires its own equity instruments to deduct those equity instruments from equity (but see also paragraph 33A). However, when an entity holds its own equity on behalf of others, eg a financial institution holding its own equity on behalf of a client, there is an agency relationship and as a result those holdings are not included in the entity's balance sheet." (v) in Appendix 1, in paragraph 5, for item (ii), the following item shall be substituted, namely: - "(ii) paragraph 4(c) & (e)". (N) in "Indian Accounting Standard (Ind AS) 36", - (i) in paragraph 2, for item (h), the following item shall be substituted, namely: - "(h) contracts within the scope of Ind AS 117, Insurance Contracts, that are assets and any assets for insurance acquisition cash flows as defined in Ind AS 117; and" (ii) after paragraph 140L, the following paragraph shall be inserted, namely: - "140M [Refer Appendix 1] 140N Ind AS 117 amended paragraph 2. An entity shall apply that amendment when it applies Ind AS 117." (iii) in Appendix 1, for paragraph 8, the fo....