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Circular
IRDAI Circular
Preparation of Financial Statements by c) Report the “Contribution to Policyholders Account
towards Excess EoM” towards the excess of
Life Insurers expenses over the allowable limits, as expense
Ref No: IRDA/F&A/CIR/MISC/184/10/2019 under Profit & Loss Account under separate sub-
line item, below the line “expenses other than
Date: 11th October, 2019
those directly related to insurance business”.
In order to bring further uniformity, comparability and fair d) Similarly, the contribution towards the
presentation of financial position in the Financial Remuneration of MD/ CEOs/ WTDs over and
Statements filed by the insurers, the Authority, in exercise above the specified limits allowed to be charged
of the powers under Section 14 of IRDA Act, 1999, hereby to the Policyholders Account, should be shown
issues the following directions: - separately as a line item in the Profit and Loss
Account (Shareholders Account).
1. Presentation of Excess of Expenses of 2. Deviation from prescribed Formats
Management (EoM) It is observed that some insurers have been modifying
The Authority vide IRDAI (Expenses of Management of the formats as specified in the IRDA (Preparation of
Insurers transacting Life Insurance business) Regulations, Financial Statements and Auditor’s Report of Insurance
2016 has specified the limits of expenses of management Companies) Regulations, 2002 by way of addition/
for life insurers. In case actual expenses of management deletion of some line items, during preparation of the
exceeds the allowable limits specified in the Regulations, financial statements.
the excess is required to be charged to Shareholders
All insurers are hereby advised to strictly adhere to the
Account I.e. Profit and Loss Account (P&L Account).
formats (including schedules) specified by the
It has been observed that some insurers are presenting Regulations and the directions issued thereunder by
the operating expenses in the Revenue Account the Authority. Any new line item, if so warranted to be
(Policyholders Account), net of the excess EoM beyond disclosed separately, may be shown under “Others” in
allowable limits. This does not present the exact Revenue Account, P&L Account and/or the relevant
expense overrun position of the Insurers. In view of the schedule of the financial statements, by giving the
same, all Insurers are hereby advised to present the details of particulars of each item.
Expenses of Management (EoM) in Financial 3. Rewards and Remuneration to Agents/
Statements, as under: -
Brokers/Other intermediaries
a) Report the gross amount of Operating expenses In order to ensure consistency, uniformity and fair
actually incurred during the period, in Schedule-3 presentation, it is hereby advised that rewards and/or
and the Revenue Account, without deducting
remuneration to agents, brokers or other
‘Excess of Expenses over the Allowable limits’.
intermediaries shall be shown as part of head
b) Report the “Contribution from Shareholders “Commission” in the financial statements. Rewards
Account towards Excess EoM” in excess of the shall be shown as a separate line item in Schedule 2
allowable expenses, as Income under Revenue “Commission”, below the line “Net Commission” in the
Account under separate sub-line item. financial statements.
The Insurance Times, November 2019 49