(Summary) Ind AS 104

Insurance Contracts

Is to specify the financial reporting for insurance contracts by any entity that issues such contracts.

Application of this standard:

  1. Insurance contracts (including reinsurance contracts) that it issues and reinsurance contracts that it holds.
  2. Financial instruments that it issues with a discretionary participation feature (para 35).

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.

Embedded derivatives:

An insurer need not account for an embedded derivative separately at fair value if the embedded derivative meets the definition of an insurance contract.

Unbundling of deposit component:

Requires an insurer to unbundle (that is, to account separately for) deposit components of some insurance contracts, to avoid the omission of assets and liabilities from its balance sheet.

  1. Insurance contract
  2. Deposit component
  3. Discretionary participation feature
  4. Cedant

Insurance contract: A contract under which one party (the insurer) 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. 

Insurer: The party that has an obligation under an insurance contract to compensate a policyholder if an insured event occurs.

Liability adequacy test:

  • An insurer should assess at the end of each reporting period whether its recognised insurance liabilities are adequate, using current estimates of future cash flows under its insurance contracts.
  • If that assessment shows that the carrying amount of its insurance liabilities (less related deferred acquisition costs and related intangible assets) is inadequate in the light of the estimated future cash flows, the entire deficiency shall be recognised in profit or loss. 

Changes in accounting policies:

An insurer may change its accounting policies for insurance contracts if, and only if, the change makes the FS more relevant to the economic decision-making needs of users and no less reliable, or more reliable and no less relevant to those needs.

Remeasuring insurance liabilities:

An insurer is permitted to change its accounting policies so that it remeasures designated insurance liabilities to reflect current market interest rates and recognises changes in those liabilities in profit or loss.


An insurer need not change its accounting policies for insurance contracts to eliminate excessive prudence.

Future investment margins:

There is a rebuttable presumption that an insurer’s FS will become less relevant and reliable if it introduces an accounting policy that reflects future investment margins in the measurement of insurance contracts.

An insurer should disclose information that identifies and explains the amounts in its FS arising from insurance contracts.


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