TaxTMI 
TaxTMI 
Insurance Contracts
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....s 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 to insurance contracts issued; and ....
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....ragraph 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 in setting the price of the contract with that customer; ....
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....ithin 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 (ii) any remaining cash outflows are attributed on a systematic and rational basis, reflecting the ca....
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.... 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 disregard information provided by its internal reporting about the effect of changes in assumptions on different contracts on the possibility of their becomin....
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....es 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 coverage units provided in the reporting period (see paragraph B119). An entity may include more contracts in the group after the end of a reporting period, subject to paragraphs 14-22. An entity shall add a cont....
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....raph 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, the fulfilment cash flows shall not reflect the non-performance risk of that entity (non-performance risk is defined in Ind AS 113, Fair Value Measurement). Measurement on initial recognition (paragraphs B36-B95F) 32. On initial recognition, an entity shall measu....
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....gation 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 as an asset any amounts relating to expected premiums or expected claims outside the boundary of the insurance contract. Such amounts relate to future insurance contracts. Discount rates (paragraphs B72-B85) 36. An entity shall adjust the estimates of future cash flows to reflect the time value....
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....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: (a) insurance revenue-for the reduction in the liability for remaining coverage because of services provided in the period, measured applying paragraphs B120-B124; (b) insurance service expenses-for losses on groups of onerous contracts, and reversals of such losses (see paragraphs 47-52); and (c) insurance finance income or expenses-for ....
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.... 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: (i) paragraph B115 (on risk mitigation) applies; (ii) the decrease in the amount of the entity's share of the fair value of the underlying items exceeds the carrying amount of the contractual service margin, giving rise to a loss (see paragraph 48); or (iii) the increase in the amount of the entity's share of the fair value of the underlying items reverses the am....
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....t 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 depicting the losses recognised applying paragraphs 47-48. The loss component determines the amounts that are presented in profit or loss as reversals of losses on onerous groups and are consequently excluded from the determination of insurance revenue. 50. After an entity has recognised a loss on an onerous group of insurance contracts, it shall allocate: (a) the subsequent changes in fulfilment cash flows of the lia....
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....ot 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 at initial recognition; (ii) minus any insurance acquisition cash flows at that date, unless the entity chooses to recognise the payments as an expense applying paragraph 59(a); and (iii) plus or minus any amount arising from the derecognition at that date of: 1. any asset for insurance acquisition cash flows applying paragraph 28C; and 2. any other asset or liability previously recognised for cash flows related to the group of ....
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....ragraph 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 the effect of financial risk if those cash flows are expected to be paid or received in one year or less from the date the claims are incurred. Reinsurance contracts held 60. The requirements in Ind AS 117 are modified for reinsurance contracts held, as set out in paragraphs 61-70A. 61. An entity shall divide portfolios of reinsurance contracts held applying paragraphs 14-24, except that the references to onerous contracts in those paragraphs shall be replaced with a reference to contrac....
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....es, 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 relates to events that occurred before the purchase of the group of reinsurance contracts held, notwithstanding the requirements of paragraph B5, the entity shall recognise such a cost immediately in profit or loss as an expense. 66. Instead of applying paragraph 44, an entity shall measure the contractual service margin at the end of the reporting period for a group of reinsurance contracts held as the carrying amount determined at the start of the reporting period, adjusted for: (a) the effect of any new contracts added to the group (see paragraph ....
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.... 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 contracts held that differ from insurance contracts issued, for example the generation of expenses or reduction in expenses rather than revenue) to simplify the measurement of a group of reinsurance contracts held, if at the inception of the group: (a) the entity reasonably expects the resulting measurement would not differ materially from the result of applying the requirements in paragraphs 63-68; or (b) the coverage period of each contract in the group of reinsurance contracts held (including insurance coverage from all premiums within the contract boundary determined at that date appl....
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....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, resulting in a different insurance contract to which Ind AS 117 would have applied; (iii) the modified contract would have had a substantially different contract boundary applying paragraph 34; or (iv) the modified contract would have been included in a different group of contracts applying paragraphs 14-24. (b) the original contract met the definition of an insurance contract with direct participation features, but the modified contract no longer meets that definition, or vice versa; or (c) the entity applied the premium allocation approach in paragraphs 53-59 or paragraphs 69-70 to the original contract,....
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....4(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 date of the contract modification, less any additional premium charged for the modification. (b) measure the new contract recognised applying paragraph 72 assuming that the entity received the premium described in (a)(iii) at the date of the modification. Presentation in the balance sheet 78. An entity shall present separately in the balance sheet the carrying amount of portfolios of: (a) insurance contracts issued that are assets; (b) insurance contracts issued that are liabilities; (c) reinsurance contracts held that are assets; and (d) reinsurance contracts held that are liabilities. 79. An entity shall includ....
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....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 on the underlying contracts as part of the claims that are expected to be reimbursed under the reinsurance contract held; (b) treat amounts from the reinsurer that it expects to receive that are not contingent on claims of the underlying contracts (for example, some types of ceding commissions) as a reduction in the premiums to be paid to the reinsurer; (ba) treat amounts recognised relating to recovery of losses applying paragraphs 66(c)(i)‒(ii) and 66A‒66B as amounts recovered from the reinsurer; and (c) not present the allocation of premiums paid as a reduction in revenue. Insurance finance income or expenses (see paragraphs B128-B136) 87. Insurance finance ....
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.... (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 the group (or contract) that were previously recognised in other comprehensive income because the entity chose the accounting policy set out in paragraph 89(b). 92. Paragraph 30 requires an entity to treat an insurance contract as a monetary item under Ind AS 21 for the purpose of translating foreign exchange items into the entity's functional currency. An entity includes exchange differences on changes in the carrying amount of groups of insurance contracts in the statement of profit or loss, unless they relate to changes in the carrying amount of groups of insurance contracts included in other comprehensive income applying paragraph 90, in which case they shall be included in other comprehensive income. Disclosure The objective of the....
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.... financial risk applying paragraphs 56. 57(b) and 59(b); and (c) the method it has chosen to recognise insurance acquisition cash flows applying paragraph 59(a). 98. An entity shall disclose reconciliations that show how the net carrying amounts of contracts within the scope of Ind AS 117 changed during the period because of cash flows and income and expenses recognised in the statement(s) of profit and loss. Separate reconciliations shall be disclosed for insurance contracts issued and reinsurance contracts held. An entity shall adapt the requirements of paragraphs 100-109 to reflect the features of reinsurance contracts held that differ from insurance contracts issued; for example, the generation of expenses or reduction in expenses rather than revenue. 99. An entity shall provide enough information in the reconciliations to enable users of financial statements to identify changes from cash flows and amounts that are recognised in the statement of profit and loss. To comply with this requirement, an entity shall: (a) disclose, in a table, the reconciliations set out in paragraphs 100-105B; and (b) for each reconciliation, present the net carrying ....
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.... the cash flows in the period described in paragraph 105(a)(i)). 104. An entity shall separately disclose in the reconciliations required in paragraph 101 each of the following amounts related to services, if applicable: (a) changes that relate to future service, applying paragraphs B96-B118, showing separately: (i) changes in estimates that adjust the contractual service margin; (ii) changes in estimates that do not adjust the contractual service margin, ie losses on groups of onerous contracts and reversals of such losses; and (iii) the effects of contracts initially recognised in the period. (b) changes that relate to current service, ie: (i) the amount of the contractual service margin recognised in profit or loss to reflect the transfer of services; (ii) the change in the risk adjustment for non-financial risk that does not relate to future service or past service; and (iii) experience adjustments (see paragraphs B97(c) and B113(a)), excluding amounts relating to the risk adjustment for non-financial risk included in (ii). (c) changes that relate to past service, ie changes in fulfilment cash flows rela....
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....premium receipts other than those that relate to future service as specified in paragraph B124(d). (b) the allocation of the portion of the premiums that relate to the recovery of insurance acquisition cash flows (see paragraph B125). 107. For insurance contracts other than those to which the premium allocation approach described in paragraphs 53-59 or 69-70A has been applied, an entity shall disclose the effect on the balance sheet separately for insurance contracts issued and reinsurance contracts held that are initially recognised in the period, showing their effect at initial recognition on: (a) the estimates of the present value of future cash outflows, showing separately the amount of the insurance acquisition cash flows; (b) the estimates of the present value of future cash inflows; (c) the risk adjustment for non-financial risk; and (d) the contractual service margin. 108. In the disclosures required by paragraph 107, an entity shall separately disclose amounts resulting from: (a) contracts acquired from other entities in transfers of insurance contracts or business combinations; and (b) groups of co....
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....pplying the modified retrospective approach (see paragraphs C6-C19A) or the fair value approach (see paragraphs C20-C24B) on the contractual service margin and insurance revenue in subsequent periods. Hence an entity shall disclose the reconciliation of the contractual service margin applying paragraph 101(c), and the amount of insurance revenue applying paragraph 103(a), separately for: (a) insurance contracts that existed at the transition date to which the entity has applied the modified retrospective approach; (b) insurance contracts that existed at the transition date to which the entity has applied the fair value approach; and (c) all other insurance contracts. 115. For all periods in which disclosures are made applying paragraphs 114(a) or 114(b), to enable users of financial statements to understand the nature and significance of the methods used and judgements applied in determining the transition amounts, an entity shall explain how it determined the measurement of insurance contracts at the transition date. 116. An entity that chooses to disaggregate insurance finance income or expenses between profit or loss and other comprehensive incom....
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....ided by insurance coverage and investment-return service or by insurance coverage and investment-related service (see paragraphs B119-B119B). 118. If, applying paragraph 88(b) or paragraph 89(b), an entity chooses to disaggregate insurance finance income or expenses into amounts presented in profit or loss and amounts presented in other comprehensive income, the entity shall disclose an explanation of the methods used to determine the insurance finance income or expenses recognised in profit or loss. 119. An entity shall disclose the confidence level used to determine the risk adjustment for non-financial risk. If the entity uses a technique other than the confidence level technique for determining the risk adjustment for non-financial risk, it shall disclose the technique used and the confidence level corresponding to the results of that technique. 120. An entity shall disclose the yield curve (or range of yield curves) used to discount cash flows that do not vary based on the returns on underlying items, applying paragraph 36. When an entity provides this disclosure in aggregate for a number of groups of insurance contracts, it shall provide such disclosures in the form ....
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.... arising from contracts within the scope of Ind AS 117, including a description of how the entity determines the concentrations, and a description of the shared characteristic that identifies each concentration (for example, the type of insured event, industry, geographical area, or currency). Concentrations of financial risk might arise, for example, from interest-rate guarantees that come into effect at the same level for a large number of contracts. Concentrations of financial risk might also arise from concentrations of non-financial risk; for example, if an entity provides product liability protection to pharmaceutical companies and also holds investments in those companies. Insurance and market risks-sensitivity analysis 128. An entity shall disclose information about sensitivities to changes in risk variables arising from contracts within the scope of Ind AS 117. To comply with this requirement, an entity shall disclose: (a) a sensitivity analysis that shows how profit or loss and equity would have been affected by changes in risk variables that were reasonably possible at the end of the reporting period: (i) for insurance risk-showing the effect for ....
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....edit risk at the end of the reporting period, separately for insurance contracts issued and reinsurance contracts held; and (b) information about the credit quality of reinsurance contracts held that are assets. Liquidity risk-other information 132. For liquidity risk arising from contracts within the scope of Ind AS 117, an entity shall disclose: (a) a description of how it manages the liquidity risk. (b) separate maturity analyses for portfolios of insurance contracts issued that are liabilities and portfolios of reinsurance contracts held that are liabilities that show, as a minimum, net cash flows of the portfolios for each of the first five years after the reporting date and in aggregate beyond the first five years. An entity is not required to include in these analyses liabilities for remaining coverage measured applying paragraphs 55-59 and paragraphs 69-70A. The analyses may take the form of: (i) an analysis, by estimated timing, of the remaining contractual undiscounted net cash flows; or (ii) an analysis, by estimated timing, of the estimates of the present value of the future cash flows. (c) the amounts th....
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....ial recognition: (a) are onerous, if any; (b) have no significant possibility of becoming onerous subsequently, if any; or (c) do not fall into either (a) or (b), if any. insurance acquisition cash flows Cash flows arising from the costs of selling, underwriting and starting a group of insurance contracts (issued or expected to be issued) that are directly attributable to the portfolio of insurance contracts to which the group belongs. Such cash flows include cash flows that are not directly attributable to individual contracts or groups of insurance contracts within the portfolio. insurance contract A contract under which one party (the issuer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. insurance contract services The following services that an entity provides to a policyholder of an insurance contract: (a) coverage for an insured event (insurance coverage); (b) for insurance contracts without direct ....
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....: (a) investigate and pay valid claims for insured events that have already occurred, including events that have occurred but for which claims have not been reported, and other incurred insurance expenses; and (b) pay amounts that are not included in (a) and that relate to: (i) insurance contract services that have already been provided; or (ii) any investment components or other amounts that are not related to the provision of insurance contract services and that are not in the liability for remaining coverage. liability for remaining coverage An entity's obligation to: (a) investigate and pay valid claims under existing insurance contracts for insured events that have not yet occurred (ie the obligation that relates to the unexpired portion of the insurance coverage); and (b) pay amounts under existing insurance contracts that are not included in (a) and that relate to: (i) insurance contract services not yet provided (ie the obligations that relate to future provision of insurance contract services); or (ii) any investment components or other amounts that are not related to th....
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....les of insurance contracts (see paragraphs B26-B30). Uncertain future event B3 Uncertainty (or risk) is the essence of an insurance contract. Accordingly, at least one of the following is uncertain at the inception of an insurance contract: (a) the probability of an insured event occurring; (b) when the insured event will occur; or (c) how much the entity will need to pay if the insured event occurs. B4 In some insurance contracts, the insured event is the discovery of a loss during the term of the contract, even if that loss arises from an event that occurred before the inception of the contract. In other insurance contracts, the insured event is an event that occurs during the term of the contract, even if the resulting loss is discovered after the end of the contract term. B5 Some insurance contracts cover events that have already occurred but the financial effect of which is still uncertain. An example is an insurance contract that provides insurance coverage against an adverse development of an event that has already occurred. In such contracts, the insured event is the determination of the ultimate cost of those c....
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....nancial risk in addition to significant insurance risk. For example, many life insurance contracts guarantee a minimum rate of return to policyholders, creating financial risk, and at the same time promise death benefits that may significantly exceed the policyholder's account balance, creating insurance risk in the form of mortality risk. Such contracts are insurance contracts. B10 Under some contracts, an insured event triggers the payment of an amount linked to a price index. Such contracts are insurance contracts, provided that the payment contingent on the insured event could be significant. For example, a life-contingent annuity linked to a cost-of-living index transfers insurance risk because the payment is triggered by an uncertain future event-the survival of the person who receives the annuity. The link to the price index is a derivative, but it also transfers insurance risk because the number of payments to which the index applies depends on the survival of the annuitant. If the resulting transfer of insurance risk is significant, the derivative meets the definition of an insurance contract, in which case it shall not be separated from the host contract (see par....
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....nse risk (ie the risk of unexpected increases in the administrative costs associated with the servicing of a contract, rather than in the costs associated with insured events) is not insurance risk because an unexpected increase in such expenses does not adversely affect the policyholder. B15 Consequently, a contract that exposes the entity to lapse risk, persistency risk or expense risk is not an insurance contract unless it also exposes the entity to significant insurance risk. However, if the entity mitigates its risk by using a second contract to transfer part of the non-insurance risk to another party, the second contract exposes the other party to insurance risk. B16 An entity can accept significant insurance risk from the policyholder only if the entity is separate from the policyholder. In the case of a mutual entity, the mutual entity accepts risk from each policyholder and pools that risk. Although policyholders bear that pooled risk collectively because they hold the residual interest in the entity, the mutual entity is a separate entity that has accepted the risk. Significant insurance risk B17 A contract is an insurance contract only if it....
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....insurance risk. An entity shall use the discount rates required in paragraph 36 to determine the present value of the additional amounts. B21 The additional amounts described in paragraph B18 refer to the present value of amounts that exceed those that would be payable if no insured event had occurred (excluding scenarios that lack commercial substance). Those additional amounts include claims handling and assessment costs, but exclude: (a) the loss of the ability to charge the policyholder for future service. For example, in an investment-linked life insurance contract, the death of the policyholder means that the entity can no longer perform investment management services and collect a fee for doing so. However, this economic loss for the entity does not result from insurance risk, just as a mutual fund manager does not take on insurance risk in relation to the possible death of a client. Consequently, the potential loss of future investment management fees is not relevant when assessing how much insurance risk is transferred by a contract. (b) a waiver, on death, of charges that would be made on cancellation or surrender. Because the contract brought t....
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....es the entity charges other new annuitants at the time the policyholder exercises that option. Such a contract transfers insurance risk to the issuer only after the option is exercised, because the entity remains free to price the annuity on a basis that reflects the insurance risk that will be transferred to the entity at that time. Consequently, the cash flows that would occur on the exercise of the option fall outside the boundary of the contract, and before exercise there are no insurance cash flows within the boundary of the contract. However, if the contract specifies the annuity rates (or a basis other than market rates for setting the annuity rates), the contract transfers insurance risk to the issuer because the issuer is exposed to the risk that the annuity rates will be unfavourable to the issuer when the policyholder exercises the option. In that case, the cash flows that would occur when the option is exercised are within the boundary of the contract. B25 A contract that meets the definition of an insurance contract remains an insurance contract until all rights and obligations are extinguished (ie discharged, cancelled or expired), unless the contract is dere....
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....nd (unless the specified event does not create significant insurance risk; for example, if the event is a change in an interest rate or a foreign exchange rate). (k) insurance swaps and other contracts that require a payment depending on changes in climatic, geological or other physical variables that are specific to a party to the contract. B27 The following are examples of items that are not insurance contracts: (a) investment contracts that have the legal form of an insurance contract but do not transfer significant insurance risk to the issuer. For example, life insurance contracts in which the entity bears no significant mortality or morbidity risk are not insurance contracts; such contracts are financial instruments or service contracts-see paragraph B28. Investment contracts with discretionary participation features do not meet the definition of an insurance contract; however, they are within the scope of Ind AS 117 provided they are issued by an entity that also issues insurance contracts, applying paragraph 3(c). (b) contracts that have the legal form of insurance, but return all significant insurance risk to the policyholder....
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....tracts that provide for reduced payments of principal, interest or both, that depend on a climatic, geological or any other physical variable, the effect of which is not specific to a party to the contract (commonly referred to as catastrophe bonds). B28 An entity shall apply other applicable Standards, such as Ind AS 109 and Ind AS 115, to the contracts described in paragraph B27. B29 The credit-related guarantees and credit insurance contracts discussed in paragraph B27(f) can have various legal forms, such as that of a guarantee, some types of letters of credit, a credit default contract or an insurance contract. Those contracts are insurance contracts if they require the issuer to make specified payments to reimburse the holder for a loss that the holder incurs because a specified debtor fails to make payment when due to the policyholder applying the original or modified terms of a debt instrument. However, such insurance contracts are excluded from the scope of Ind AS 117 unless the issuer has previously asserted explicitly that it regards the contracts as insurance contracts and has used accounting applicable to insurance contracts (see paragraph 7(e)). B....
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....yholder. For the purpose of separation, an entity shall not consider activities that an entity must undertake to fulfil a contract unless the entity transfers a good or service other than insurance contract services to the policyholder as those activities occur. For example, an entity may need to perform various administrative tasks to set up a contract. The performance of those tasks does not transfer a service to the policyholder as the tasks are performed. B34 A good or service other than an insurance contract service promised to a policyholder is distinct if the policyholder can benefit from the good or service either on its own or together with other resources readily available to the policyholder. Readily available resources are goods or services that are sold separately (by the entity or by another entity), or resources that the policyholder has already got (from the entity or from other transactions or events). B35 A good or service other than an insurance contract service that is promised to the policyholder is not distinct if: (a) the cash flows and risks associated with the good or service are highly interrelated with the cash flows and risks a....
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....extent that: (i) the entity expects those insurance acquisition cash flows to exceed the net cash inflow for the expected renewals, determined applying paragraph 32(a); and (ii) the excess determined applying (b)(i) has not already been recognised as an impairment loss applying (a). Measurement (paragraphs 29-71) Estimates of future cash flows (paragraphs 33-35) B36 This section addresses: (a) unbiased use of all reasonable and supportable information available without undue cost or effort (see paragraphs B37-B41); (b) market variables and non-market variables (see paragraphs B42-B53); (c) using current estimates (see paragraphs B54-B60); and (d) cash flows within the contract boundary (see paragraphs B61-B71). Unbiased use of all reasonable and supportable information available without undue cost or effort (paragraph 33(a)) B37 The objective of estimating future cash flows is to determine the expected value, or probability-weighted mean, of the full range of possible outcomes, considering all reasonable and supportable information available at the reporting date without undue cost or effort. Rea....
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....under possible future contracts. B41 An entity shall estimate the probabilities and amounts of future payments under existing contracts on the basis of information obtained including: (a) information about claims already reported by policyholders. (b) other information about the known or estimated characteristics of the insurance contracts. (c) historical data about the entity's own experience, supplemented when necessary with historical data from other sources. Historical data is adjusted to reflect current conditions, for example, if: (i) the characteristics of the insured population differ (or will differ, for example, because of adverse selection) from those of the population that has been used as a basis for the historical data; (ii) there are indications that historical trends will not continue, that new trends will emerge or that economic, demographic and other changes may affect the cash flows that arise from the existing insurance contracts; or (iii) there have been changes in items such as underwriting procedures and claims management procedures that may affect the relevance of historical data to the insurance....
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.... of a replicating asset or a replicating portfolio of assets. A replicating asset is one whose cash flows exactly match, in all scenarios, the contractual cash flows of a group of insurance contracts in amount, timing and uncertainty. In some cases, a replicating asset may exist for some of the cash flows that arise from a group of insurance contracts. The fair value of that asset reflects both the expected present value of the cash flows from the asset and the risk associated with those cash flows. If a replicating portfolio of assets exists for some of the cash flows that arise from a group of insurance contracts, the entity can use the fair value of those assets to measure the relevant fulfilment cash flows instead of explicitly estimating the cash flows and discount rate. B47 Ind AS 117 does not require an entity to use a replicating portfolio technique. However, if a replicating asset or portfolio does exist for some of the cash flows that arise from insurance contracts and an entity chooses to use a different technique, the entity shall satisfy itself that a replicating portfolio technique would be unlikely to lead to a materially different measurement of those cash ....
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....ble market variables. For example, estimated probabilities for future inflation rate scenarios shall be as consistent as possible with probabilities implied by market interest rates. B52 In some cases, an entity may conclude that market variables vary independently of non-market variables. If so, the entity shall consider scenarios that reflect the range of outcomes for the non-market variables, with each scenario using the same observed value of the market variable. B53 In other cases, market variables and non-market variables may be correlated. For example, there may be evidence that lapse rates (a non-market variable) are correlated with interest rates (a market variable). Similarly, there may be evidence that claim levels for house or car insurance are correlated with economic cycles and therefore with interest rates and expense amounts. The entity shall ensure that the probabilities for the scenarios and the risk adjustments for the non-financial risk that relates to the market variables are consistent with the observed market prices that depend on those market variables. Using current estimates (paragraph 33(c)) B54 In estimating each cash flow s....
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....ple, suppose that mortality experience in the reporting period was 20 per cent worse than the previous mortality experience and previous expectations of mortality experience. Several factors could have caused the sudden change in experience, including: (a) lasting changes in mortality; (b) changes in the characteristics of the insured population (for example, changes in underwriting or distribution, or selective lapses by policyholders in unusually good health); (c) random fluctuations; or (d) identifiable non-recurring causes. B57 An entity shall investigate the reasons for the change in experience and develop new estimates of cash flows and probabilities in the light of the most recent experience, the earlier experience and other information. The result for the example in paragraph B56 would typically be that the expected present value of death benefits changes, but not by as much as 20 per cent. In the example in paragraph B56, if mortality rates continue to be significantly higher than the previous estimates for reasons that are expected to continue, the estimated probability assigned to the high-mortality scenarios will increa....
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....s in the group will exercise the options available, and the risk adjustment for non-financial risk shall reflect the entity's current estimates of how the actual behaviour of the policyholders may differ from the expected behaviour. This requirement to determine the expected value applies regardless of the number of contracts in a group; for example it applies even if the group comprises a single contract. Thus, the measurement of a group of insurance contracts shall not assume a 100 per cent probability that policyholders will: (a) surrender their contracts, if there is some probability that some of the policyholders will not; or (b) continue their contracts, if there is some probability that some of the policyholders will not. B63 When an issuer of an insurance contract is required by the contract to renew or otherwise continue the contract, it shall apply paragraph 34 to assess whether premiums and related cash flows that arise from the renewed contract are within the boundary of the original contract. B64 Paragraph 34 refers to an entity's practical ability to set a price at a future date (a renewal date) that fully reflects....
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....utable to the portfolio to which the contract belongs. (f) claim handling costs (ie the costs the entity will incur in investigating, processing and resolving claims under existing insurance contracts, including legal and loss-adjusters' fees and internal costs of investigating claims and processing claim payments). (g) costs the entity will incur in providing contractual benefits paid in kind. (h) policy administration and maintenance costs, such as costs of premium billing and handling policy changes (for example, conversions and reinstatements). Such costs also include recurring commissions that are expected to be paid to intermediaries if a particular policyholder continues to pay the premiums within the boundary of the insurance contract. (i) transaction-based taxes (such as premium taxes, value added taxes and goods and services taxes) and levies (such as fire service levies and guarantee fund assessments) that arise directly from existing insurance contracts, or that can be attributed to them on a reasonable and consistent basis. (j) payments by the insurer in a fiduciary capacity to meet tax obligations incurred by the policyhold....
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....ed in profit or loss when incurred. (e) cash flows that arise from abnormal amounts of wasted labour or other resources that are used to fulfil the contract. Such costs are recognised in profit or loss when incurred. (f) income tax payments and receipts the insurer does not pay or receive in a fiduciary capacity or that are not specifically chargeable to the policyholder under the terms of the contract. (g) cash flows between different components of the reporting entity, such as policyholder funds and shareholder funds, if those cash flows do not change the amount that will be paid to the policyholders. (h) cash flows arising from components separated from the insurance contract and accounted for using other applicable Standards (see paragraphs 10-13). B66A Before the recognition of a group of insurance contracts, an entity might be required to recognise an asset or liability for cash flows related to the group of insurance contracts other than insurance acquisition cash flows either because of the occurrence of the cash flows or because of the requirements of another Ind AS. Cash flows are related to the gr....
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....s in another group, the fulfilment cash flows of the first group would include the payments of CU100 (ie would be CU350) and the fulfilment cash flows of the second group would exclude CU100 of the guaranteed amount. B70 Different practical approaches can be used to determine the fulfilment cash flows of groups of contracts that affect or are affected by cash flows to policyholders of contracts in other groups. In some cases, an entity might be able to identify the change in the underlying items and resulting change in the cash flows only at a higher level of aggregation than the groups. In such cases, the entity shall allocate the effect of the change in the underlying items to each group on a systematic and rational basis. B71 After all insurance contract services have been provided to the contracts in a group, the fulfilment cash flows may still include payments expected to be made to current policyholders in other groups or future policyholders. An entity is not required to continue to allocate such fulfilment cash flows to specific groups but can instead recognise and measure a liability for such fulfilment cash flows arising from all groups. Discoun....
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....lying items. B73 To determine the discount rates at the date of initial recognition of a group of contracts described in paragraphs B72(b)-B72(e), an entity may use weighted-average discount rates over the period that contracts in the group are issued, which applying paragraph 22 cannot exceed one year. B74 Estimates of discount rates shall be consistent with other estimates used to measure insurance contracts to avoid double counting or omissions; for example: (a) cash flows that do not vary based on the returns on any underlying items shall be discounted at rates that do not reflect any such variability; (b) cash flows that vary based on the returns on any financial underlying items shall be: (i) discounted using rates that reflect that variability; or (ii) adjusted for the effect of that variability and discounted at a rate that reflects the adjustment made. (c) nominal cash flows (ie those that include the effect of inflation) shall be discounted at rates that include the effect of inflation; and (d) real cash flows (ie those that exclude the effect of inflation) shall be discounted at rates that exclude th....
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....h external and internal (see paragraph B49). In particular, the discount rates used shall not contradict any available and relevant market data, and any non-market variables used shall not contradict observable market variables. (b) reflect current market conditions from the perspective of a market participant. (c) exercise judgement to assess the degree of similarity between the features of the insurance contracts being measured and the features of the instrument for which observable market prices are available and adjust those prices to reflect the differences between them. B79 For cash flows of insurance contracts that do not vary based on the returns on underlying items, the discount rate reflects the yield curve in the appropriate currency for instruments that expose the holder to no or negligible credit risk, adjusted to reflect the liquidity characteristics of the group of insurance contracts. That adjustment shall reflect the difference between the liquidity characteristics of the group of insurance contracts and the liquidity characteristics of the assets used to determine the yield curve. Yield curves reflect assets traded in active markets that....
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....ecent transactions in instruments with similar characteristics for movements in market factors since the transaction date, and shall adjust observed market rates to reflect the degree of dissimilarity between the instrument being measured and the instrument for which transaction prices are observable. For cash flows of insurance contracts that do not vary based on the returns on the assets in the reference portfolio, such adjustments include: (a) adjusting for differences between the amount, timing and uncertainty of the cash flows of the assets in the portfolio and the amount, timing and uncertainty of the cash flows of the insurance contracts; and (b) excluding market risk premiums for credit risk, which are relevant only to the assets included in the reference portfolio. B84 In principle, for cash flows of insurance contracts that do not vary based on the returns of the assets in the reference portfolio, there should be a single illiquid risk-free yield curve that eliminates all uncertainty about the amount and timing of cash flows. However, in practice the top-down approach and the bottomup approach may result in different yield curves, even in the sa....
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....er cent probability of being CU110, and fulfilling a liability that is fixed at CU100. As a result, the risk adjustment for non-financial risk conveys information to users of financial statements about the amount charged by the entity for the uncertainty arising from nonfinancial risk about the amount and timing of cash flows. B88 Because the risk adjustment for non-financial risk reflects the compensation the entity would require for bearing the non-financial risk arising from the uncertain amount and timing of the cash flows, the risk adjustment for non-financial risk also reflects: (a) the degree of diversification benefit the entity includes when determining the compensation it requires for bearing that risk; and (b) both favourable and unfavourable outcomes, in a way that reflects the entity's degree of risk aversion. B89 The purpose of the risk adjustment for non-financial risk is to measure the effect of uncertainty in the cash flows that arise from insurance contracts, other than uncertainty arising from financial risk. Consequently, the risk adjustment for non-financial risk shall reflect all non-financial risks associated with the insur....
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....or determining the risk adjustment for nonfinancial risk to disclose the technique used and the confidence level corresponding to the results of that technique. Initial recognition of transfers of insurance contracts and business combinations (paragraph 39) B93 When an entity acquires insurance contracts issued or reinsurance contracts held in a transfer of insurance contracts that do not form a business or in a business combination within the scope of Ind AS 103, the entity shall apply paragraphs 14-24 to identify the groups of contracts acquired, as if it had entered into the contracts on the date of the transaction. B94 An entity shall use the consideration received or paid for the contracts as a proxy for the premiums received. The consideration received or paid for the contracts excludes the consideration received or paid for any other assets and liabilities acquired in the same transaction. In a business combination within the scope of Ind AS 103, the consideration received or paid is the fair value of the contracts at that date. In determining that fair value, an entity shall not apply paragraph 47 of Ind AS 113 (relating to demand features). B95 &nbs....
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....and onerous contracts not covered by the group of reinsurance contracts held. To apply paragraph B95B in such cases, an entity shall use a systematic and 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. Asset for insurance acquisition cash flows B95E When an entity acquires insurance contracts issued in a transfer of insurance contracts that do not form a business or in a business combination within the scope of Ind AS 103, the entity shall recognise an asset for insurance acquisition cash flows at fair value at the date of the transaction for the rights to obtain: (a) future insurance contracts that are renewals of insurance contracts recognised at the date of the transaction; and (b) future insurance contracts, other than those in (a), after the date of the transaction without paying again insurance acquisition cash flows the acquiree has already paid that are directly attributable to the related portfolio of insurance contracts. B95F At the date of the transaction, the amoun....
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....he time value of money. If an entity makes such a disaggregation, it shall adjust the contractual service margin for the change related to non-financial risk, measured at the discount rates specified in paragraph B72(c). B97 An entity shall not adjust the contractual service margin for a group of insurance contracts without direct participation features for the following changes in fulfilment cash flows because they do not relate to future service: (a) the effect of the time value of money and changes in the time value of money and the effect of financial risk and changes in financial risk. These effects comprise: (i) the effect, if any, on estimated future cash flows; (ii) the effect, if disaggregated, on the risk adjustment for non-financial risk; and (iii) the effect of a change in discount rate. (b) changes in estimates of fulfilment cash flows in the liability for incurred claims. (c) experience adjustments, except those described in paragraph B96(a). B98 The terms of some insurance contracts without direct participation features give an entity discretion over the cash flows to be paid....
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....ance contracts in a group affect the cash flows to policyholders of contracts in other groups (see paragraphs B67-B71), an entity shall assess whether the conditions in paragraph B101 are met by considering the cash flows that the entity expects to pay the policyholders determined applying paragraphs B68-B70. B104 The conditions in paragraph B101 ensure that insurance contracts with direct participation features are contracts under which the entity's obligation to the policyholder is the net of: (a) the obligation to pay the policyholder an amount equal to the fair value of the underlying items; and (b) a variable fee (see paragraphs B110-B118) that the entity will deduct from (a) in exchange for the future service provided by the insurance contract, comprising: (i) the amount of the entity's share of the fair value of the underlying items; less (ii) fulfilment cash flows that do not vary based on the returns on underlying items. B105 A share referred to in paragraph B101(a) does not preclude the existence of the entity's discretion to vary the amounts paid to the policyholder. However, the link to the underlying items must be e....
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.... pay to the policyholder vary with the changes in the fair value of the underlying items because the guaranteed return and other cash flows that do not vary based on the returns on underlying items do not exceed the fair value return on the underlying items; and (b) the cash flows that the entity expects to pay to the policyholder do not vary with the changes in the fair value of the underlying items because the guaranteed return and other cash flows that do not vary based on the returns on underlying items exceed the fair value return on the underlying items. The entity's assessment of the variability in paragraph B101(c) for this example will reflect a present value probability-weighted average of all these scenarios. B109 Reinsurance contracts issued and reinsurance contracts held cannot be insurance contracts with direct participation features for the purposes of Ind AS 117. B110 For insurance contracts with direct participation features, the contractual service margin is adjusted to reflect the variable nature of the fee. Hence, changes in the amounts set out in paragraph B104 are treated as set out in paragraphs B111- B114. B111 Changes ....
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....e and strategy for mitigating financial risk as described in paragraph B115. In applying that objective and strategy: (a) an economic offset exists between the insurance contracts and the derivative, non-derivative financial instrument measured at fair value through profit or loss, or reinsurance contract held (ie the values of the insurance contracts and those risk mitigating items generally move in opposite directions because they respond in a similar way to the changes in the risk being mitigated). An entity shall not consider accounting measurement differences in assessing the economic offset. (b) credit risk does not dominate the economic offset. B117 The entity shall determine the fulfilment cash flows in a group to which paragraph B115 applies in a consistent manner in each reporting period. B117A If the entity mitigates the effect of financial risk using derivatives or non-derivative financial instruments measured at fair value through profit or loss, it shall include insurance finance income or expenses for the period arising from the application of paragraph B115 in profit or loss. If the entity mitigates the effect of financial risk using re....
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....mple, in a negative interest rate environment); and (c) the entity expects to perform investment activity to generate that investment return. Reinsurance contracts held-recognition of recovery of losses on underlying insurance contracts (paragraphs 66A−66B) B119C Paragraph 66A applies if, and only if, the reinsurance contract held is entered into before or at the same time as the onerous underlying insurance contracts are recognised. B119D To apply paragraph 66A, an entity shall determine the adjustment to the contractual service margin of a group of reinsurance contracts held and the resulting income by multiplying: (a) the loss recognised on the underlying insurance contracts; and (b) the percentage of claims on the underlying insurance contracts the entity expects to recover from the group of reinsurance contracts held. B119E Applying paragraphs 14‒22, 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 paragraphs 66(c)(....
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....h B125. B123 Applying Ind AS 115, when an entity provides services, it derecognises the performance obligation for those services and recognises revenue. Consistently, applying Ind AS 117, when an entity provides services in a period, it reduces the liability for remaining coverage for the services provided and recognises insurance revenue. The reduction in the liability for remaining coverage that gives rise to insurance revenue excludes changes in the liability that do not relate to services expected to be covered by the consideration received by the entity. Those changes are: (a) changes that do not relate to services provided in the period, for example: (i) changes resulting from cash inflows from premiums received; (ii) changes that relate to investment components in the period; (iia) changes resulting from cash flows from loans to policyholders; (iii) changes that relate to transaction-based taxes collected on behalf of third parties (such as premium taxes, value added taxes and goods and services taxes) (see paragraph B65(i)); (iv) insurance finance income or expenses; (v) insurance acquisition cas....
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....urance revenue related to insurance acquisition cash flows by allocating the portion of the premiums that relate to recovering those cash flows to each reporting period in a systematic way on the basis of the passage of time. An entity shall recognise the same amount as insurance service expenses. B126 When an entity applies the premium allocation approach in paragraphs 55-58, insurance revenue for the period is the amount of expected premium receipts (excluding any investment component and adjusted to reflect the time value of money and the effect of financial risk, if applicable, applying paragraph 56) allocated to the period. The entity shall allocate the expected premium receipts to each period of insurance contract services: (a) on the basis of the passage of time; but (b) if the expected pattern of release of risk during the coverage period differs significantly from the passage of time, then on the basis of the expected timing of incurred insurance service expenses. B127 An entity shall change the basis of allocation between paragraphs B126(a) and B126(b) as necessary if facts and circumstances change. Insurance finance income or expens....
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....cognised in other comprehensive income at any date is the difference between the carrying amount of the group of contracts and the amount that the group would be measured at when applying the systematic allocation. B131 For groups of insurance contracts for which changes in assumptions that relate to financial risk do not have a substantial effect on the amounts paid to the policyholder, the systematic allocation is determined using the discount rates specified in paragraph B72(e)(i). B132 For groups of insurance contracts for which changes in assumptions that relate to financial risk have a substantial effect on the amounts paid to the policyholders: (a) a systematic allocation for the finance income or expenses arising from the estimates of future cash flows can be determined in one of the following ways: (i) using a rate that allocates the remaining revised expected finance income or expenses over the remaining duration of the group of contracts at a constant rate; or (ii) for contracts that use a crediting rate to determine amounts due to the policyholders- using an allocation that is based on the amounts credited in the period and e....
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....hange an entity shall: (a) include the accumulated amount previously included in other comprehensive income by the date of the change as a reclassification adjustment in profit or loss in the period of change and in future periods, as follows: (i) if the entity had previously applied paragraph 88(b)-the entity shall include in profit or loss the accumulated amount included in other comprehensive income before the change as if the entity were continuing the approach in paragraph 88(b) based on the assumptions that applied immediately before the change; and (ii) if the entity had previously applied paragraph 89(b)-the entity shall include in profit or loss the accumulated amount included in other comprehensive income before the change as if the entity were continuing the approach in paragraph 89(b) based on the assumptions that applied immediately before the change. (b) not restate prior period comparative information. B136 When applying paragraph B135(a), an entity shall not recalculate the accumulated amount previously included in other comprehensive income as if the new disaggregation had always applied; and the assumptions used for the....
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....pplies the option. C4 To apply Ind AS 117 retrospectively, an entity shall at the transition date: (a) identify, recognise and measure each group of insurance contracts as if Ind AS 117 had always applied; (aa) identify, recognise and measure any assets for insurance acquisition cash flows as if Ind AS 117 had always applied (except that an entity is not required to apply the recoverability assessment in paragraph 28E before the transition date); (b) derecognise any existing balances that would not exist had Ind AS 117 always applied; and (c) recognise any resulting net difference in equity. C5 If, and only if, it is impracticable for an entity to apply paragraph C3 for a group of insurance contracts, an entity shall apply the following approaches instead of applying paragraph C4(a): (a) the modified retrospective approach in paragraphs C6-C19A, subject to paragraph C6 (a); or (b) the fair value approach in paragraphs C20-C24B. C5A Notwithstanding paragraph C5, an entity may choose to apply the fair value approach in paragraphs C20- C24B for a group of insuranc....
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....ctive approach, an entity is permitted to use each modification in paragraphs C9-C19A only to the extent that an entity does not have reasonable and supportable information to apply a retrospective approach. Assessments at inception or initial recognition C9 To the extent permitted by paragraph C8, an entity shall determine the following matters using information available at the transition date: (a) how to identify groups of insurance contracts, applying paragraphs 14-24; (b) whether an insurance contract meets the definition of an insurance contract with direct participation features, applying paragraphs B101-B109; (c) how to identify discretionary cash flows for insurance contracts without direct participation features, applying paragraphs B98-B100; and (d) whether an investment contract meets the definition of an investment contract with discretionary participation features within the scope of Ind AS 117, applying paragraph 71. C9A To the extent permitted by paragraph C8, an entity shall classify as a liability for incurred claims a liability for settlement of claims incurred before an insurance contract....
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....rmine the risk adjustment for non-financial risk at the date of initial recognition of a group of insurance contracts (or subsequently) by adjusting the risk adjustment for non-financial risk at the transition date by the expected release of risk before the transition date. The expected release of risk shall be determined by reference to the release of risk for similar insurance contracts that the entity issues at the transition date. C14A Applying paragraph B137, an entity may choose not to change the treatment of accounting estimates made in previous interim financial statements. To the extent permitted by paragraph C8, such an entity shall determine the contractual service margin or loss component at the transition date as if the entity had not prepared interim financial statements before the transition date. C14B To the extent permitted by paragraph C8, an entity shall use the same systematic and rational method the entity expects to use after the transition date when applying paragraph 28A to allocate any insurance acquisition cash flows paid (or for which a liability has been recognised applying another Ind AS) before the transition date (e....
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....nt before the transition date applying paragraphs C12-C14D and using a systematic basis of allocation. C16A For a group of reinsurance contracts held that provides coverage for an onerous group of insurance contracts and was entered into before or at the same time that the insurance contracts were issued, an entity shall establish a loss-recovery component of the asset for remaining coverage at the transition date (see paragraphs 66A-66B). To the extent permitted by paragraph C8, an entity shall determine the loss-recovery component 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. C16B Applying paragraphs 14‒22, at the transition date an entity might include in an onerous group of insurance contracts both onerous insurance contracts covered by a group of reinsurance contracts held and onerous insurance contracts not covered by the group of reinsurance contra....
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....fore the transition date; or (e) if (a)-(c) result in a loss component-adjust the loss component to nil and increase the liability for remaining coverage excluding the loss component by the same amount. C17A To the extent permitted by paragraph C8, an entity shall apply paragraphs C14B‒C14D to recognise an asset for insurance acquisition cash flows, and any adjustment to the contractual service margin of a group of insurance contracts with direct participation features for insurance acquisition cash flows (see paragraph C17(c)(iv)). Insurance finance income or expenses C18 For groups of insurance contracts that, applying paragraph C10, include contracts issued more than one year apart: (a) an entity is permitted to determine the discount rates at the date of initial recognition of a group specified in paragraphs B72(b)-B72(e)(ii) and the discount rates at the date of the incurred claim specified in paragraph B72(e)(iii) at the transition date instead of at the date of initial recognition or incurred claim. (b) if an entity chooses to disaggregate insurance finance income or expenses between amounts included in profit or lo....
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....m, also applying paragraph C13; and (iv) 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. C19A Applying paragraph B137, an entity may choose not to change the treatment of accounting estimates made in previous interim financial statements. To the extent permitted by paragraph C8, such an entity shall determine amounts related to insurance finance income or expenses at the transition date as if it had not prepared interim financial statements before the transition date. Fair value approach C20 To apply the fair value approach, an entity shall determine the contractual service margin or loss component of the liability for remaining coverage at the transition date as the difference between the fair value of a group of insurance contracts at that date and the fulfilment cash flows measured at that date. In determining that fair value, an entity shall not apply paragraph 47 of Ind AS 113, Fair Value Measurement (relating to demand features). C20A For a group of reinsurance contracts held to which paragraphs 66A-66B apply....
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....a transfer of insurance contracts that do not form a business or in a business combination within the scope of Ind AS 103. C23 In applying the fair value approach, an entity is not required to apply paragraph 22, and may include in a group contracts issued more than one year apart. An entity shall only divide groups into those including only contracts issued within a year (or less) if it has reasonable and supportable information to make the division. Whether or not an entity applies paragraph 22, it is permitted to determine the discount rates at the date of initial recognition of a group specified in paragraphs B72(b)-B72(e)(ii) and the discount rates at the date of the incurred claim specified in paragraph B72(e)(iii) at the transition date instead of at the date of initial recognition or incurred claim. C24 In applying the fair value approach, if an entity chooses to disaggregate insurance finance income or expenses between profit or loss and other comprehensive income, it is permitted to determine the cumulative amount of insurance finance income or expenses recognised in other comprehensive income at the transition date: (a) retrospectively-but only if it....
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....mparative information and disclosures for any earlier periods, it shall clearly identify the information that has not been adjusted, disclose that it has been prepared on a different basis, and explain that basis. C28 An entity need not disclose previously unpublished information about claims development that occurred earlier than five years before the end of the annual reporting period in which it first applies Ind AS 117. However, if an entity does not disclose that information, it shall disclose that fact. Entities that first apply Ind AS 117 and Ind AS 109 at the same time C28A An entity that first applies Ind AS 117 and Ind AS 109 at the same time is permitted to apply paragraphs C28B-C28E (classification overlay) for the purpose of presenting comparative information about a financial asset where the comparative information 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 classi....
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.... At the date of initial application of Ind AS 117, an entity that had applied Ind AS 109 to annual reporting periods before the initial application of Ind AS 117: (a) may reassess whether an eligible financial asset meets the condition in paragraph 4.1.2(a) or paragraph 4.1.2A(a) of Ind AS 109. A financial asset is eligible only if the financial asset is not held in respect of an activity that is unconnected with contracts within the scope of Ind AS 117. Examples of financial assets that would not be eligible for reassessment are financial assets held in respect of banking activities or financial assets held in funds relating to investment contracts that are outside the scope of Ind AS 117. (b) shall revoke its previous designation of 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 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 compreh....
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....l reporting period qualitative information that would enable users of financial statements to understand: (a) how it applied paragraph C29 to financial assets the classification of which has changed on initially applying Ind AS 117; (b) the reasons for any designation or de-designation of financial assets as measured at fair value through profit or loss applying paragraph 4.1.5 of Ind AS 109; and (c) why the entity came to any different conclusions in the new assessment applying paragraphs 4.1.2(a) or 4.1.2A(a) of Ind AS 109. C33A For a financial asset derecognised between the transition date and date of initial application of Ind AS 117, an entity may apply paragraphs C28B-C28E (classification overlay) for the purpose of presenting comparative information 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&nbs....