Year-end considerations

Flashcards on Year-End Considerations

Ind AS 104, Insurance Contracts

A standard replaced by Ind AS 117, Insurance Contracts, effective for annual reporting periods starting on or after 1 April 2024.

Issuer (under Ind AS 117)

The party that assumes significant insurance risk from another party by agreeing to compensate the policyholder if a specified uncertain future event adversely impacts them.

Warranties under Ind AS 115

These are assurance-type and service-type warranties issued directly by a manufacturer/dealer/retailer in connection with the sale of goods/services to a customer.

Financial Guarantee (FG) contracts

Contracts that transfer credit risk and may have various legal forms such as letters of credit, a credit default guarantee, or an insurance contract.

Performance Guarantee

A contractual commitment that one party makes to another, assuring the fulfillment of specific obligations outlined in the contract.

General Model (Ind AS 117)

This model continuously reassesses liabilities based on current expectations of future claims.

Premium Allocation Approach (PAA)

This approach simplifies accounting for contracts with a coverage period of one year or less, allocating premiums over the coverage period on the basis of either the passage of time or the expected release from risk.

Variable Fee Approach (VFA)

This approach is tailored for contracts with direct participation features that are linked to a pool of underlying investments.

Sale and leaseback transaction

A financial arrangement in which an entity (the seller-lessee) sells an asset to another entity (the buyer-lessor) and subsequently rents the same asset back.

Hybrid Annuity Mode (HAM)

A combination of both engineering, procurement and construction (EPC) and build, operate and transfer (BOT) annuity.

Key Management Personnel (KMP)

They are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.

IFRS 8, Operating Segments

Requires an entity to disclose the specified amounts for each reportable segment when those amounts are included in the measure of segment profit or loss reviewed by the Chief Operating Decision Maker (CODM).

Physical PPAs

These involve the actual delivery of electricity from the seller to the buyer. The buyer typically has a contractual right to the electricity and an obligation to purchase it at the agreed price.

Virtual PPAs

These contracts do not involve the physical delivery of electricity. Instead, they are financial contracts where the settlement is based on the difference between the agreed PPA price and the market price of electricity.

IFRS 9

Applies to contracts for non-financial items that can be net settled in cash or other financial instruments, treating them as financial instruments, except when such contracts are held for the entity’s expected operational use (‘own use’ exemption).

BEPS Pillar Two Model Rules

These aim to ensure that large multinational groups pay a minimum amount of tax on income arising in each jurisdiction in which they operate, is achieved by applying a system of top-up taxes that results in the total amount of taxes payable on excess profit in each jurisdiction representing at least the minimum rate of 15%.

Management-defined Performance Measures (MPMs)

A subtotal of income and expenses that an entity uses in public communications outside financial statement.

The Rumour verification requirement

This involves setting up the necessary technological infrastructure and providing training to their staff to effectively manage thereby ensuring compliance and disclose pertinent information.