Basics are similar to basics of other forms of accounting. However, there are certain peculiarities that make for specialization of insurance accounting (A) General Accounting: Items such as “Balance Sheet, Receipt and Payments Accounts, cash Flow Statement, and Profit and Loss Account etc will be in line with the accounting standard (AS) issued by the ICAI to the extent applicable to insurers carrying on general insurance business with 3 exceptions. The 3 exceptions are: (a) Cash Flow statement to be prepared only under direct method (b) Accounting for investments is not applicable, and (c) Segment reporting applies to all insurers. (B) Premium: Premium is to be recognized as income over the contract period or the period of risk. Premium received in advance not relating to the current accounting period to be disclosed separately under the head current liabilities. Premium reserve for unexpired risks has to be created. Premium deficiency to be recognized if the expected claim costs and related expenses exceed the related reserve for unexpired risks. (C) Acquisition Costs: Acquisition costs to be placed in the period in which they are incurred (D) Claims: The ultimate cost of claims to an insurer comprises claim under the policies and specific claims settlement costs. Claims under policies comprise the claims made for losses incurred, and those estimated or anticipated under the policies following a loss occurrence. A liability for outstanding claims shall be brought to account in respect of both direct business and inward reinsurance business. The liabilities shall include (i) the future payments in relation to unpaid reported claims (ii) Claims incurred but not reported including inadequate reserves. (E) Investments: Detailed procedure is prescribed for determining value of various investments, such as Real Estate, Investment Property, debt securities, equity securities and derivative instruments. (F) Loans: at historical costs (G) Catastrophe Reserve to be created in accordance with the norms, if any, prescribed by the authority. (H) Accounting Module: to be introduced and implemented.