Page 181 - IC46 addendum

Indian Accounting Standards

The option to take the
cash payment or the
period-certain annuity
(‘the second option’) is
not an insurance
contract (unless the
option is contingent to a
significant extent on
survival), so it must be
separated. However,
because the second
option and the life-
contingent option are
alternatives, their fair
values are inter-
dependent. If they are
so interdependent that
the issuer cannot
measure the second
option separately (ie
without considering the
life-contingent option),
the second option is
closely related to the
host insurance contract.
In that case, fair value
measurement is not
required (but not
prohibited).

2.12 Policyholder option to Fair value measurement The surrender option is

surrender a contract for is not required (but not closely related to the host

a cash surrender value prohibited: paragraph 8 contract if the surrender

specified in a schedule of the Standard). value is approximately

(ie not indexed and not The surrender value equal to the amortised
accumulating interest). may be viewed as a cost at each exercise date
deposit component, but (paragraph AG30(g) of Ind
this Standard does not AS 39). Otherwise, the
require an insurer to surrender option is
unbundle a contract if it measured at fair value.

recognises all its

obligations arising under

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