Indian Accounting Standard (Ind AS) 104, Insurance Contracts, Important Material
Ind AS 104: Insurance Contracts
This Standard applies to insurance companies only, however this Standard does not apply to all entities issuing insurance contracts.
Insurance companies and other financial services entities issuing insurance contracts are usually regulated by the country specific regulations. In India The IRDA prescribes accounting for all insurance companies which do not allow much scope for accounting to be done as per Standard or Generally Accepted Accounting Principles (GAAP).
To specify the financial reporting for insurance contracts by any entity that issues such contracts.
This Ind AS requires:
(i) limited improvements to accounting; and
(ii) disclosure, that identifies and explains the amounts in an insurer’s financial statements arising from insurance contracts and helps users of those financial statements understand the financial statement.
An entity shall apply this Ind AS to:
(a) insurance contracts that it issues and reinsurance contracts that it holds.
(b) financial instruments that it issues with a discretionary participation feature.
Ind AS 107, Financial Instruments: Disclosures, requires disclosure about financial instruments, including financial instruments that contain such features.
This Ind AS does not address other aspects of accounting by insurers, such as accounting for financial assets held by insurers and financial liabilities issued by insurers.
An entity shall not apply this Ind AS to:
(a) product warranties issued directly by a manufacturer, dealer or retailer.
(b) employers’ assets and liabilities under employee benefit plans and retirement benefit obligations reported by defined benefit retirement plans.
(c) contractual rights or contractual obligations that are contingent on the future use of, or right to use, a nonfinancial item, as well as a lessee’s residual value guarantee embedded in a finance lease.
(d) financial guarantee contracts unless the issuer has previously asserted explicitly that it regards such contracts as insurance contracts.
(e) contingent consideration payable or receivable in a business combination.
(f) direct insurance contracts that the entity holds. However, a cedant shall apply this Standard to reinsurance contracts that it holds.