Hello everyone, i hope someone can help me with your thoughts over this transaction:
Company A decides to acquire a cell within a formally constituted captive "Captive B". Company A is the sole beneficiary of that cell, and the cell is legally ring-fenced from any other cells within Captive B. I have the following doubts:
- Does the cell meet the definition of "Silo" under IFRS 10? Cell holder (Compay A) does not have control over the cell, which remains with Cautiva B. Should be consolidated?
- The interests in the profits of the cell is held through a Participation Agreement, which is similar to a preference share in nature – it is the governing instrument that deals with the rights and obligations of Company A, including the access to profit of the cell. The other document is the policy (or reinsurance policy) and this would be a normal policy.
- Company A, pays a premium which is deposited in the cell. Captive B charges annual administrative fees. How should be the accounting treatment in Company A if the cell is consolidated?
- What do you think is the treatment if it does not consolidate?
Captive cell accountig
Re: Captive cell accountig
My guess is that this question is too broad for a forums' discussion...
Re: Captive cell accountig
ok i can sum it up like this: a captive cell that is legally separate from any other cell within a large captive, should it be consolidated in the financial statements of the cell owner/beneficiary?
Re: Captive cell accountig
These control criteria are relevant here:
https://ifrscommunity.com/knowledge-bas ... nk-control
Are they satisfied?
https://ifrscommunity.com/knowledge-bas ... nk-control
Are they satisfied?
Re: Captive cell accountig
what kind of business does this happen in? I've never come across it. why are there legally distinct cells within a single entity - why not separate it out if it's that important?
Re: Captive cell accountig
I remember a previous discussion we had on this topic. As JRSB asked, what's the business, is it an insurance business ?
viewtopic.php?f=4&t=938&p=6524&hilit=cell#p6524
viewtopic.php?f=4&t=938&p=6524&hilit=cell#p6524
Re: Captive cell accountig
"Company A, pays a premium which is deposited in the cell. Captive B charges annual administrative fees."
What's the purpose of this transaction, could you please extend it a bit more, thanks.
What's the purpose of this transaction, could you please extend it a bit more, thanks.