Page 188 - IC46 addendum

Insurance Contracts

Loan to (from) the reinsurer

Year Opening Interest at Payments Additional Closing
balance 10 per centper original payments balance
schedule in case 2
Rs Rs Rs Rs Rs

0––6–6

1 6 1 7 (115) (101)

2 (101) (10) 7 39 (65)

3 (65) (7) 7 36 (29)

4 (29) (3) 6 31 5

5 5 1 (45) 39 0

Total (18) (12) 30

Shadow accounting

IG6 Paragraph 30 of this Standard permits, but does not require, a practice
sometimes described as ‘shadow accounting’. IG Example 4 illustrates
shadow accounting.

IG7 Shadow accounting is not the same as fair value hedge accounting
under Ind AS 39 and will not usually have the same effect. Under Ind AS 39,
a non-derivative financial asset or non-derivative financial liability may be
designated as a hedging instrument only for a hedge of foreign currency
risk.

IG8 Shadow accounting is not applicable for liabilities arising from
investment contracts (ie contracts within the scope of Ind AS 39) because
the underlying measurement of those liabilities (including the treatment of
related transaction costs) does not depend on asset values or asset returns.
However, shadow accounting may be applicable for a discretionary
participation feature within an investment contract if the measurement of
that feature depends on asset values or asset returns.

IG9 Shadow accounting is not applicable if the measurement of an
insurance liability is not driven directly by realised gains and losses on
assets held. For example, assume that financial assets are measured at fair
value and insurance liabilities are measured using a discount rate that reflects
current market rates but does not depend directly on the actual assets held.

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