ICICI Bank 2008 Annual Report Download - page 164

F90
v) Un-realised loss/(gain) on trading portfolio of participating funds
Under Indian GAAP, accounting for investments is in accordance with the guidelines issued by the Insurance
Regulatory and Development Authority, which do not allow the unrealised gain to be routed through the
revenue account except in the case of linked businesses. Under US GAAP, as per the requirements of
Statement No. 115 on “Accounting for Certain Investments in Debt and Equity Securities” unrealised loss/(gain)
on investments classified as held for trading is taken to the revenue account.
The details of the significant differences between Indian GAAP and US GAAP for the general insurance
subsidiary are given below:
Rupees in million
Reconciling items Year ended March 31,
2006 2007 2008
Profit as per Indian GAAP ............................................................ 503 684 1,029
Adjustments on account of:
Provision for re-insurance commission ......................................... (480) (1,304) (956)
Amortisation of deferred acquisition costs ................................... 423 931 420
Premium deficiency ....................................................................... (87) (215) 341
Compensation costs ...................................................................... — (39) (46)
Deferred taxes ................................................................................ 55 211 79
Others ............................................................................................ (19) — 8
Profit as per US GAAP .................................................................. 395 268 875
The aforesaid differences in respect of our general insurance subsidiary are described below:
i) Provision for re-insurance commission
Under Indian GAAP in the absence of any specific guidance, re-insurance commission on business
ceded is recognised as income in the year of the ceding of the risk. Under US GAAP, proceeds from
re-insurance transactions that represent recovery of acquisition costs are reduced from un-amortised
acquisition costs in such a manner that net acquisition costs are capitalised and charged to expense in
proportion to net revenue recognised.
ii) Amortisation of deferred acquisition costs
Under Indian GAAP, acquisition cost is charged as expense to the revenue account in the year in which
it is incurred whereas under US GAAP the same is capitalised and charged to expense in proportion to
premium revenue recognised.
iii) Premium deficiency
Under Indian GAAP, premium deficiency is recognised if the sum of the expected claims costs, related
expenses and maintenance costs exceeds related unearned premiums. Indian regulations require
assessment and recognition of premium deficiency under “Fire”, “Marine” and “Miscellaneous” segments
of business and not under each line of businesses in the revenue account. Under US GAAP, a premium
deficiency relating to short-term insurance contracts indicates a probable loss. A premium deficiency for
each line of business is assessed and recognised in the revenue account if the sum of expected claim
costs and claim adjustment expenses, expected dividends to policyholders, un-amortised acquisition
costs and maintenance costs exceeds related unearned premiums.
A premium deficiency is recognised by first charging un-amortised acquisition costs to expense to
the extent required to eliminate the deficiency. If the premium deficiency is greater than un-amortised
acquisition costs, a liability for the excess deficiency is required to be accrued.
iv) Compensation costs
Under Indian GAAP, stock compensation costs are accounted for by the intrinsic value method as
compared to US GAAP where the compensation costs have been accounted for at the fair value method
in accordance with the requirement of Statement No. 123(R).
d) Valuation of debt and equity securities
Under Indian GAAP, net unrealised gains on investments by category are ignored, except for the venture capital
investments wherein the unrealised gains and losses are transferred to Reserves and Surplus.
Under US GAAP, unrealised gains or losses on trading assets are recognised in the profit and loss account and unrealised
gains or losses on securities classified as ‘available for sale’ are recognised in ‘Accumulated Other Comprehensive
Income’ under stockholders’ equity. Under US GAAP, unrealised gains or losses on investments of venture capital
subsidiaries are recognised in the profit and loss account.
reconciliation to US GAAP and related notes
for the year ended March 31, 2008
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