Page 168 - IC46 addendum

Insurance Contracts

1.12 A credit-related guarantee Not an insurance contract. A
that does not, as a derivative within the scope of Ind
precondition for payment, AS 39.
require that the holder is
exposed to, and has incurred
a loss on, the failure of
the debtor to make payments
on the guaranteed asset
when due. An example of
such a guarantee is one
that requires payments in
response to changes in a
specified credit rating or
credit index.

1.13 Guarantee fund established The contract that establishes the
by contract. The contract guarantee fund is an insurance
requires all participants to contract (see IG Example 1.11).
pay contributions to the
fund so that it can meet
obligations incurred by
participants (and, perhaps,
others). Participants would
typically be from a single
industry, eg insurance,
banking or travel.

1.14 Guarantee fund established The commitment of participants to
by law. contribute to the fund is not
established by a contract, so there
is no insurance contract. Within the
scope of Ind AS 37 Provisions,
Contingent Liabilities and Contingent
Assets.

1.15 Residual value insurance or Insurance contract within the scope

residual value guarantee. of the Standard (unless changes in

Guarantee by one party of the condition of the asset have an

the fair value at a future date insignificant effect). The risk of

of a non-financial asset held changes in the fair value of the non-

by a beneficiary of the insur- financial asset is not a financial risk

ance or guarantee. because the fair value reflects not

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