Captive cell accountig

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mortegam
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Joined: 26 Oct 2020, 17:31

Captive cell accountig

Post by mortegam »

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?
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Marek Muc
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Re: Captive cell accountig

Post by Marek Muc »

My guess is that this question is too broad for a forums' discussion...
mortegam
Posts: 4
Joined: 26 Oct 2020, 17:31

Re: Captive cell accountig

Post by mortegam »

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?
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Marek Muc
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Re: Captive cell accountig

Post by Marek Muc »

These control criteria are relevant here:

https://ifrscommunity.com/knowledge-bas ... nk-control

Are they satisfied?
JRSB
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Re: Captive cell accountig

Post by JRSB »

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?
Leo
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Joined: 05 Apr 2020, 22:31

Re: Captive cell accountig

Post by Leo »

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
Leo
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Joined: 05 Apr 2020, 22:31

Re: Captive cell accountig

Post by Leo »

"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.
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