Financial reporting in Bangladesh's insurance sector is facing setbacks due to some inconsistencies between International Financial Reporting Standards (IFRS) and local laws and regulations, said speakers at a conference.

They also identified differences regarding components of financial statements and presentations, revenue recognition, financial instruments, estimated insurance liabilities, etc, says a press release from the Institute of Chartered Accountants of Bangladesh (ICAB).

The local rules are derived from The Insurance Act, 1938; Insurance Rules, 1958; The Insurance Act, 2010; The Financial Reporting Act, 2015; The Companies Act, 1994; and The Securities and Exchange Rules, 1987.

Referring to the absence of takaful guidelines for reporting, the speakers said they have to maintain three specific funds under the takaful business – operator fund, participants' investment fund, and participants' risk fund.

As a result, they need clear direction from regulators while IFRS guidelines on takaful insurance reporting need further alignment with the local rules and regulations.

Takaful is a type of insurance system devised to comply with the shariah laws, in which money is pooled and invested.

The virtual conference on "Financial Reporting in Insurance Sector of Bangladesh" was organised by the ICAB on Monday.

On the classification of owner-occupied property, the 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, the general understanding in case of conflict is that the local laws or guidance from primary regulators would prevail. As a result, a number of deviations are seen from the IFRS in the financial reporting of insurance companies, they observed.

The ICAB, Financial Reporting Council, Bangladesh (FRC) and Insurance Development and Regulatory Authority (IDRA) will develop a roadmap to align accounting practices in Bangladesh with the IFRS, they said.

IDRA Chairman M Mosharraf Hossain was the chief guest while ICAB President Mahmudul Hasan Khusru delivered the welcome address.

Muhammad Farooq, ICAB member council, chaired the session while ICAB CEO Shubhashish Bose delivered the introductory speech.