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Saturday, April 14, 2012

IRDA gets tough on reporting of expenses

The regulator has asked insurers to strictly adhere to norms related to reporting of expenses management to ensure uniformity.

In a circular sent to all insurance companies, Mr R.K. Nair, Member (Finance & Investments), said a detailed review of statements filed by insurers had shown divergent practices in the interpretation of terms mentioned in the regulation.

These divergences are mainly observed in the interpretation of the terms "charges" and "expenses capitalised", he said.

Clarifying the intended meaning of the terms, IRDA said charges would include all charges levied directly or indirectly in respect of the insurance business but excluded taxes which are a charge against profits.

Expenses such as administration and other general expenses should be treated as expenses capitalised.

For the purpose of computation of expenses of management, income/expenditure should be accounted on accrual basis, the circular said.

The circular will be effective from financial year 2011-12.


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