IFRS and local regulations should be aligned

Speakers at a conference on Monday said financial reporting in insurance sector of Bangladesh is facing setback due to some grey areas between the International Financial Reporting Standard (IFRS) and existing local rules and regulations.

They also identified the differences between IFRS and local laws and regulations in regards to components of financial statements and presentations, revenue recognition, financial instruments, estimated insurance liabilities, etc.

Bangladesh Insurance Sector is currently governed by the regulatory frameworks; The Insurance Act, 1938 and the corresponding Insurance Rules, 1958; The Insurance Act, 2010 (however, no corresponding Insurance Rules or Regulations for all areas); The Financial Reporting Act, 2015; The Companies Act, 1994; The Securities and Exchange Rules, 1987 and IFRS (International Financial Reporting Standards).

"We have to maintain three specific funds under the Takaful business - Operator fund, Participants' Investment Fund, and Participants' Risk fund and hence we need clear direction from regulators while IFRS guidelines on Takaful insurance reporting needs further alignment with the local rules and regulations", they said referring to the absence of Takaful Guidelines for Reporting.

On the classification of owner-occupied property, speakers said IFRS requires owner-occupied property to be reported under the property, plant and equipment heading of the balance sheet. However, local regulatory framework mandates all real estate properties to be reflected within the Investments heading of the balance sheet.

In general practice, in case of conflict, general understanding is that the local laws / guidance from primary regulators would prevail. As a result, a number of deviations are seen from IFRS in the financial reporting of insurance companies, they observed.

The above observations have been emanated from a virtual members' conference on 'Financial Reporting in Insurance Sector of Bangladesh' organised by the Institute of Chartered Accountants of Bangladesh (ICAB) on Monday through online zoom app.

For implementing full IFRS reporting framework there is an urgent need to align the Insurance Regulator and other authorities like ICAB, and FRC, they suggested saying that ICAB together with FRC and IDRA would develop a road map to align accounting practice in Bangladesh with IFRS.

Dr. M. Mosharraf Hossain FCA, Chairman, Insurance Development and Regulatory Authority graced the occasion as the Chief Guest. Mahmudul Hasan Khusru FCA, President, ICAB delivered address of welcome. Muhammad Farooq FCA, Member Council and Past President-ICAB introduced the Keynote Speaker and chaired the session while ICAB Chief Executive Officer (CEO) Shubhashish Bose delivered introductory speech.

M Ala Uddin Ahmad FCA, General Manager, MetLife Bangladesh; Mohammad Mohiuddin Ahmed FCA, Executive Director, Financial Report Monitoring Division, Financial Reporting Council Bangladesh, Md. Alamgir Hossain, Member (Income Tax Policy), National Board of Revenue; Nurun Nahar, Executive Director, Deposit Insurance Department, Bangladesh Bank were present as special guests. Abdul Kader Joaddar FCA, Vice President, ICAB delivered closing remarks of the conference.

Sk. Md. Tarikul Islam FCA, Partner, Hoda Vasi Chowdhury & Co., Chartered Accountants and Ala Uddin FCA, Chief Financial Officer, American Life Insurance Company (MetLife) presented keynote papers in the conference.