It is quite common to have some kind of arrangements where a party agrees to provide some fixed period maintenance at fixed price. There is nothing specifies by current accounting system to identify any such arrangement if could cover under Insurance Contracts.
After the applicability of Ind-As, these kind of arrangement could be classified as Insurance Contracts and will be required to have extensive disclosures and might require for an adequacy of the liability test.
Let’s have look at the definition of the Insurance as per Ind-As 104-
Insurance Contract
“A contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder”
Let’s have a look at an example of Fixed Price maintenance contract and analyse if it will fall under Insurance contract definition as per Ind-As 104 –
Example –
Entity A (General repair & maintenance company which provides variety of repairing services only) has signed an agreement with Company P to provide a full maintenance of a German made Machinery (which costed around INR 10 M) for next 3 years.....http://gyanifrs.com/2017/04/fixed-price-repair-maintenance-contract-an-insurance-product/
After the applicability of Ind-As, these kind of arrangement could be classified as Insurance Contracts and will be required to have extensive disclosures and might require for an adequacy of the liability test.
Let’s have look at the definition of the Insurance as per Ind-As 104-
Insurance Contract
“A contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder”
Let’s have a look at an example of Fixed Price maintenance contract and analyse if it will fall under Insurance contract definition as per Ind-As 104 –
Example –
Entity A (General repair & maintenance company which provides variety of repairing services only) has signed an agreement with Company P to provide a full maintenance of a German made Machinery (which costed around INR 10 M) for next 3 years.....http://gyanifrs.com/2017/04/fixed-price-repair-maintenance-contract-an-insurance-product/
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