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Sustaining Reliable Financial reporting framework- regulator perspective

Sustaining Reliable Financial reporting framework- regulator perspective. By Ramakrishnan.S. Topics. Keeping up with the times Convergence to IFRS by 2011 Certain major issues raised by Insurance companies. Keeping up with the times.

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Sustaining Reliable Financial reporting framework- regulator perspective

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  1. Sustaining Reliable Financial reporting framework- regulator perspective By Ramakrishnan.S

  2. Topics • Keeping up with the times • Convergence to IFRS by 2011 • Certain major issues raised by Insurance companies

  3. Keeping up with the times • Net premium reserve formula -the basis for current standard Insurance valuation law in USA- established more than 150 years ago by Elzur Wright, an actuary and commissioner for the state of Massachusetts! • Main Issue- • Times have changed and are changing- one needs to run to be in same place!

  4. Tomorrow’s business and yesterday’s laws • New facts of life like: • De-tariff • New products like E&O, Directors’ liability • etc. etc. • Old laws, rules and formats! • Our Insurance Act was drawn in 1938! • Our Companies Act is dated 1956!

  5. The goal –convergence to IFRS by 2011 • IFRS 4 on Insurance contracts itself came into effect only in Jan 05 • IFRS 4 is itself Phase 1 of IASB’s project on insurance contracts. • Thus even internationally it is an evolving area • Indian standard for Insurance contracts under preparation • Largely expected to follow IFRS 4 in view of proposed convergence by 2011 • Time is short but changes are many and are fundamental

  6. AS 30- related issues • For AS 30- Financial instruments recognition and measurement- as well as new standard on Insurance contracts, the main issue is fair value approach • Which will mean attendant other operating issues and decisions like product design, pricing etc. • Are we prepared for ‘fair value’? • Transitional provisions for AS 30 required -so that solvency is not an issue • Example AS 15 limited revision–after banks took up matter -permission to defer over 5 years given

  7. IFRS convergence road map • Major issues: • Amortisation of acquisition costs • Investment valuation and • Premium recognition

  8. Issues for discussion • 1. For each LOB, should notional rent allocation be permitted? • 2. Disclosures related to Unit linked plans • 3. Group funds • 4. Consistency in valuation of investments across the industry • 5. Changes required in audit regulations • 6. Audit methodology differences between auditors

  9. Issues for discussion • 7.Review by auditors of actuarial valuations. • 8. Impact of Rev AS 15 • 9. Treatment of deferred taxation in policy holder a/c • 10. Need for guidance on allocation in segment accounting • 11. EAC opinion on operating leases when there is escalation clause. • 12. Non financial info.

  10. IRDA/ICAI role • Guidance to bring in uniformity • Amending old / inapplicable rules • Better and more transparent disclosures • Making forms simpler and more meaningful • Ensuring smooth sailing towards IFRS • Do let us have your suggestions • Help us to help you!

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