IAS37 Supplementary Agents Indemnity Fund
The Challenge
The Supplementary Agents Indemnity Fund, in accordance with law or agency contract, is due to trade agents terminating the mandate, with the exception, nonetheless, of voluntary resignation. This liability must be taken into account in the preparation of the IAS balance sheet by means of a specific provision (estimated on the basis of, for example, past experience and statistics on the payment of indemnities). Although the occurrence of the event is probable (and therefore can not be determined beyond the existence of the event) the right to receive the allowance is stipulated by the contract with the agent. Hence the liability is due to the fact that the obligation derives from a contract and the obligation is indefinite in the amount as it is linked to random events that could also lead to a lack of payments.
In the balance sheet, a provision for this liability needs to be made. This is done by estimating the amount which is due for the allowance on the basis of the company’s historical data. The quantification of the amount owed must be calculated using actuarial techniques to estimate, in the most effective way, the variables that will determine the total cost to be sustained for delivery to post-employment benefits.
The Solution
Eurokleis has developed a methodology that enables the analytically analysis of the demographic and economic phenomena underlying the correct actuarial valuation of the Supplementary Client Benefit Fund (FISC). This methodology, implemented in a dedicated software environment, allows you to calculate at any time the IAS 37 value of the FISC to be used both in IAS / IFRS and in the Civil Budget as well as the corresponding (annual or periodic provision).
The value of the FISC according to the actuarial methodology is systematically lower than what is assigned, the supplementary allowances corresponding to the commission payable to the agent, as well as the cost of the period. This is because one takes into account the turnover phenomena, termination of company mandates, mortality and disability, and timely deferral of amounts owed.
The estimated amount owed by the expiration of agency contracts must be discounted on the basis of an appropriate interest rate maturity structure. This way of proceeding provides an actuarial value of the FISC that can be used both for IAS / IFRS (Financial Statements drawn up in accordance with International Accounting Standards) and for Civilian Purposes (Civil Budget) purposes. The value of the fund thus obtained, as well as its annual subsidy, is lower than that resulting from the simple provision of the full amount of the benefits matured by the agent.
Autori dell’articolo
Francesco Bellini
senior partner & founder - Innovation & Finance
Chartered Accountant and Accounting Auditor
Luca Satolli
senior partner - CEO
IT Manager with transverse skills acquired over time
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