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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ________ to _________
Commission File Number 001-33034
FREEDOM HOLDING CORP.
(Exact name of registrant as specified in its charter)
Nevada30-0233726
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
“Esentai Tower” BC, Floor 7
77/7 Al Farabi Ave
Almaty, Kazakhstan
50040
(Address of principal executive offices)(Zip Code)
+7 727 311 10 64
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
CommonFRHC
The Nasdaq Capital Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer o
Non-accelerated fileroSmaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes   No x
As of August 8, 2022, the registrant had 59,542,212 shares of common stock, par value $0.001, issued and outstanding.




FREEDOM HOLDING CORP.
FORM 10-Q
TABLE OF CONTENTS
Pages
Condensed Consolidated Balance Sheets as of June 30, 2022, and March 31, 2022
 

2



FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
June 30, 2022
March 31, 2022*
(Recast)
ASSETS
Cash and cash equivalents$905,685 $626,363 
Restricted cash375,118 553,680 
Trading securities1,420,481 1,280,874 
Available-for-sale securities, at fair value219,470 161,364 
Brokerage and other receivables, net511,047 357,746 
Loans issued223,519 94,840 
Fixed assets, net 29,203 21,802 
Intangible assets, net 9,404 7,441 
Goodwill 5,932 5,898 
Right-of-use asset 24,394 16,353 
Deferred income tax assets16,263 12,069 
Insurance contract assets7,170 5,712 
Other assets49,508 33,350 
TOTAL ASSETS$3,797,194 $3,177,492 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Securities repurchase agreement obligations$1,030,171 $872,692 
Customer liabilities1,652,643 1,416,954 
Trade payables 82,202 45,230 
Insurance contract liabilities 135,563 119,490 
Current income tax liability 23,803 14,556 
Securities sold, not yet purchased – at fair value7,706 14,103 
Loans received5,435 3,538 
Debt securities issued115,629 99,027 
Lease liability23,642 16,035 
Deferred distribution payments 8,534 8,534 
Other liabilities79,984 20,725 
Payable for acquisition24,966  
TOTAL LIABILITIES 3,190,278 2,630,884 
Commitments and Contingent Liabilities (Note 23)  
SHAREHOLDERS’ EQUITY
Preferred stock - $0.001 par value; 20,000,000 shares authorized, no shares issued or outstanding
  
Common stock - $0.001 par value; 500,000,000 shares authorized; 59,542,212 shares issued and outstanding as of June 30, 2022, and March 31, 2022, respectively
59 59 
Additional paid in capital152,532 174,746 
Retained earnings502,990 441,923 
Accumulated other comprehensive loss(39,676)(63,125)
TOTAL EQUITY ATTRIBUTABLE TO THE COMPANY615,905 553,603 
Non-controlling interest(8,989)(6,995)
TOTAL SHAREHOLDERS’ EQUITY606,916 546,608 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$3,797,194 $3,177,492 
The accompanying notes are an integral part of these condensed consolidated financial statements
3


FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)`
For The Three Months Ended
June 30, 2022
June 30, 2021*
(Recast)
Revenue:
Fee and commission income$131,641 $97,383 
Net gain on trading securities15,582 10,741 
Net realized loss on investments available for sale(593)(31)
Interest income49,453 24,662 
Insurance underwriting income24,241 14,076 
Net gain/(loss) on foreign exchange operations5,019 (1,024)
Net gain/(loss) on derivative1,265 (60)
TOTAL REVENUE, NET226,608 145,747 
Expense:
Fee and commission expense25,241 23,260 
Interest expense45,829 16,495 
Insurance claims incurred, net of reinsurance16,692 11,296 
Operating expense65,467 33,244 
Provision for impairment losses2,798 293 
Other (income)/expense, net(527)125 
TOTAL EXPENSE155,500 84,713 
NET INCOME BEFORE INCOME TAX71,108 61,034 
Income tax expense(12,035)(5,664)
NET INCOME$59,073 $55,370 
Less: Net loss attributable to non-controlling interest in subsidiary(1,994)(52)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$61,067 $55,422 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect866 874 
Reclassification adjustment relating to available-for-sale investments disposed of in the period, net of tax effect593 31 
Foreign currency translation adjustments, net of tax effect21,977 3,022 
OTHER COMPREHENSIVE INCOME23,436 3,927 
COMPREHENSIVE INCOME BEFORE NON-CONTROLLING INTERESTS$82,509 $59,297 
Less: Comprehensive loss attributable to non-controlling interest in subsidiary(1,994)(52)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$84,503 $59,349 
BASIC NET INCOME PER COMMON SHARE (In U.S. dollars)0.99 0.93 
DILUTED NET INCOME PER COMMON SHARE (In U.S. dollars)0.99 0.93 
Weighted average number of shares (basic)59,542,212 59,474,712 
Weighted average number of shares (diluted)59,542,212 59,531,446 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
For The Three Months Ended
June 30, 2022
June 30, 2021*
(Recast)
Cash Flows Used In Operating Activities
Net income$59,073 $55,370 
Adjustments to reconcile net income used in operating activities:
Depreciation and amortization1,440 1,445 
Noncash lease expense2,511 1,973 
Change in deferred taxes2,181 (2,225)
Stock compensation expense3,697 2,162 
Unrealized loss on trading securities(7,881)(5,030)
Net change in accrued interest(9,898)(4,286)
Change in insurance reserves17,718 12,246 
Allowances for receivables2,798 293 
Changes in operating assets and liabilities:
Trading securities(42,915)(90,666)
Brokerage and other receivables(32,647)(54,152)
Loans issued(126,638)(1,968)
Assets from insurance activities(1,426)(103)
Other assets(10,009)1,654 
Securities sold, not yet purchased – at fair value(6,580)6,467 
Customer liabilities(171,136)(122,275)
Current income tax liability9,247 5,007 
Trade payables30,310 128,218 
Lease liabilities(2,615)(2,173)
Liabilities from insurance activity(3,875)(3,074)
Other liabilities56,931 (1,348)
Net cash flows used in operating activities(229,714)(72,465)
Cash Flows Used In Investing Activities
Purchase of fixed assets(6,225)(2,704)
Proceeds from sale of fixed assets 179 
Purchase of available-for-sale securities, at fair value(87,828)(51,936)
Proceeds from sale of available-for-sale securities, at fair value36,432 48,674 
Net cash flows used in investing activities(57,621)(5,787)
Cash Flows From Financing Activities
Proceeds from securities repurchase agreement obligations127,580 23,498 
Proceeds from issuance of debt securities16,280  
Repurchase of debt securities (10,105)
Capital contributions677 1,265 
Proceeds from loans received1,897  
Net cash flows from financing activities146,434 14,658 
Effect of changes in foreign exchange rates on cash and cash equivalents241,661 23,782 
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH100,760 (39,812)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD1,180,043 1,137,575 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD$1,280,803 $1,097,763 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
For The Three Months Ended
June 30, 2022
June 30, 2021*
(Recast)
Supplemental disclosure of cash flow information:
Cash paid for interest$24,488 $8,848 
Income tax paid$131 $2,824 
Supplemental non-cash disclosures:
Operating lease right-of-use assets obtained/disposed of in exchange for operating lease obligations during the period, net$4,282 $5,705 
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows:
June 30, 2022
June 30, 2021
(Recast)
Cash and cash equivalents$905,685 $678,717 
Restricted cash375,118 419,046 
Total cash, cash equivalents and restricted cash shown as in the statement of cash flows$1,280,803 $1,097,763 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Common StockAdditional
paid
in capital
Retained
earnings
Accumulated
other
comprehensive
loss
Non-
controlling
interest
Total
SharesAmount
Balance As At March 31, 2021 (Recast)
58,443,212 $58 $135,261 $214,429 $(40,434)$(1,641)$307,673 
Stock based compensation1,031,500 — 2,162 — — — 2,162 
Contribution of shareholder— — 1,265 — — — 1,265 
Translation difference— — — — 3,022 — 3,022 
Other comprehensive reserve— — — — 907 — 907 
Net income (loss)— — — 55,422 — (52)55,370 
Balance As At June 30, 2021 (Recast)
59,474,712 $58 $138,688 $269,851 $(36,505)$(1,693)$370,399 
Balance As At March 31, 2022 (Recast)
59,542,212 $59 $174,746 $441,923 $(63,125)$(6,995)$546,608 
Stock based compensation— — 3,697 — — — 3,697 
Acquisition of insurance companies— — (26,588)— — — (26,588)
Capital contributions— — 677 — — — 677 
Translation difference— — — — 21,977 — 21,977 
Other comprehensive reserve— — — — 1,472 — 1,472 
Net income (loss)— — — 61,067 — (1,994)59,073 
Balance As At June 30, 2022
59,542,212 $59 $152,532 $502,990 $(39,676)$(8,989)$606,916 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

Table of Contents
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)

NOTE 1 – DESCRIPTION OF BUSINESS
Overview
Freedom Holding Corp. (the "Company" or "FRHC") is a corporation organized in the United States under the laws of the State of Nevada that through its operating subsidiaries provides financial services including retail securities brokerage, research, investment counseling, securities trading, market making, retail banking, corporate investment banking and underwriting services, commercial banking and insurance products. The Company is headquartered in Almaty, Kazakhstan, with supporting administrative office locations in Russia, Cyprus and the United States. The Company has retail locations in Kazakhstan, Russia, Ukraine, Uzbekistan, Kyrgyzstan, Azerbaijan, Armenia, Cyprus, the UK, Greece, Spain, France, Germany and United Arab Emirates. The Company also owns a U.S. Securities and Exchange Commission ("SEC") registered broker dealer. The Company's common stock trades on the Nasdaq Capital Market.

As of June 30, 2022, the Company owned directly, or through subsidiaries, the following companies:

Freedom Finance JSC, an Almaty, Kazakhstan-based securities broker-dealer ("Freedom KZ");
Freedom Finance Global PLC, an Astana International Financial Centre-based securities broker-dealer, ("Freedom Global");
Bank Freedom Finance Kazakhstan JSC, an Almaty, Kazakhstan-based bank ("Freedom Bank KZ");
Freedom Finance Life JSC, an Almaty, Kazakhstan-based life/health insurance company ("Freedom Life");
Freedom Finance Insurance JSC, an Almaty, Kazakhstan-based liability insurance company ("Freedom Insurance");
Investment Company Freedom Finance LLC, a Moscow, Russia-based securities broker-dealer ("Freedom RU");
FFIN Bank LLC, a Moscow, Russia-based bank ("Freedom Bank RU");
Freedom Finance Special Purpose Company LTD, an Astana International Financial Centre-based special purpose company ("Freedom SPC");
Freedom Finance Commercial LLP, a Kazakhstan-based sales consulting company ("Freedom Commercial");
Freedom Finance Europe Limited, a Limassol, Cyprus-based broker-dealer ("Freedom EU");
Freedom Finance Technologies Ltd, a Limassol, Cyprus-based IT development company ("Freedom Technologies");
Freedom Finance Germany GmbH, a Berlin, Germany-based tied agent of Freedom EU ("Freedom GE");
Freedom UK Prime Limited, a London, United Kingdom-based financial intermediary company ("Prime UK");
Freedom Finance Uzbekistan LLC, a Tashkent, Uzbekistan-based broker-dealer ("Freedom UZ");
Freedom Finance Azerbaijan LLC, an Azerbaijan-based financial educational center ("Freedom AZ");
Freedom Finance Armenia LLC, an Armenia-based broker-dealer ("Freedom AR");
Prime Executions, Inc., a New York City, New York-based NYSE institutional brokerage, that is also approved to engage in certain capital markets and investment banking activities ("PrimeEx");
FFIN Securities, Inc., a currently-dormant Nevada corporation ("FFIN");
Freedom Finance Ltd., a Dubai, United Arab Emirates-based financial intermediary company ("Freedom UAE"); and
ITS Tech Limited, an Astana International Financial Centre-based, IT-support company ("ITS Tech").

The Company also owns a 9% interest in Freedom Finance Ukraine LLC, a Kiev, Ukraine-based broker-dealer ("Freedom UA"). The remaining 91% interest in Freedom UA is owned by Askar Tashtitov, the Company's president. The Company has entered into a series of contractual arrangements with Freedom UA and Mr. Tashtitov, including a consulting services agreement, an operating agreement and an option agreement.

Because such agreements obligate the Company to guarantee the performance of all Freedom UA obligations and provide Freedom UA sufficient funding to cover all Freedom UA operating losses and net capital requirements, enable the Company to receive 90% of the net profits of Freedom UA after tax, and require the Company to provide Freedom UA the management competence, operational support, and ongoing access to the Company's significant assets, necessary technology resources and expertise to conduct the business of Freedom UA, the Company accounts for Freedom UA as a variable interest entity ("VIE") under the accounting standards of the Financial Accounting Standards Board ("FASB"). Accordingly, the financial statements of Freedom UA are consolidated into the financial statements of the Company.

8

Table of Contents
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Prior to July 2021 we owned approximately 32.9% of Freedom UA, but due to changes to Ukrainian regulations to restrict foreign ownership of registered Ukrainian broker-dealers, in July 2021 we were required to sell approximately 23.9% of our equity interest in Freedom UA to Mr. Tashtitov, reducing our direct ownership interest in Freedom UA to approximately 9%.

The Company is seeking to sell its interest in its Russian subsidiaries, Freedom RU and Freedom Bank RU. For additional financial information regarding the Company's Russian subsidiaries see Note 24 - Segment Reporting to the condensed consolidated financial statements and Divestiture of our Russian Subsidiaries in the Overview section of Management's Discussion and Analysis of Financial Condition and Results of Operations in this quarterly report on Form 10-Q.
The Company’s subsidiaries are professional participants on the Kazakhstan Stock Exchange (KASE), Astana International Stock Exchange (AIX), Moscow Exchange (MOEX), Saint-Petersburg Exchange (SPBX), the Ukrainian Exchange (UX), the Republican Stock Exchange of Tashkent (UZSE), the Uzbek Republican Currency Exchange (UZCE) and a member of the New York Stock Exchange (NYSE) and Nasdaq Stock Exchange (Nasdaq). The Company also own a 24.3% interest in the UX. Freedom EU provides the Company's clients with operations support and access to the investment opportunities, relative stability, and integrity of the U.S. and European securities markets.
Unless otherwise specifically or contextually indicated, FRHC, Freedom KZ, Freedom Global, Freedom Bank KZ, Freedom RU, Freedom Bank RU, Freedom SPC, Freedom Commercial, Freedom EU, Freedom Technologies, Freedom GE, Prime UK, Freedom UZ, Freedom AZ, Freedom AR, Freedom UA, Freedom Insurance, Freedom Life, Freedom UAE, ITS Tech, PrimeEx and FFIN are collectively referred to herein as the “Company”.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting principles
The Company's accounting policies and accompanying condensed consolidated financial statements conform to accounting principles generally accepted in the United States of America (U.S. GAAP).
These financial statements have been prepared on the accrual basis of accounting.
Basis of presentation and principles of consolidation
The Company's condensed consolidated financial statements present the condensed consolidated accounts of FRHC, Freedom RU, Freedom Bank RU, Freedom KZ, Freedom Global, Freedom Bank KZ, Freedom EU, Freedom GE, Freedom UZ, PrimeEx, Freedom Technologies, Prime UK, Freedom AZ, FFIN, Freedom SPC, Freedom Commercial, Freedom AR, Freedom UA, Freedom UAE, ITS Tech, Freedom Insurance and Freedom Life. All significant inter-company balances and transactions have been eliminated from the condensed consolidated financial statements.
Consolidation of variable interest entities
In accordance with accounting standards regarding consolidation of variable interest entities ("VIEs"), VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. VIEs must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates utilized in preparing the Company's financial statements are reasonable and prudent. Actual results could differ from those estimates.
9

Table of Contents
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Revenue and expense recognition
Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services promised to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. A significant portion of the Company's revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as loans and investment securities, as these activities are subject to other U.S. GAAP guidance discussed elsewhere within these disclosures. Descriptions of the Company's revenue-generating activities that are within the scope of ASC Topic 606, which are presented in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income as components of non-interest income are as follows:
Commissions on brokerage services;
Commissions on banking services (money transfers, foreign exchange operations and other); and
Commissions on investment banking services (underwriting, market making, and bondholders' representation services).
Under Topic 606, the Company is required to recognize incentive fees when they are probable and there is not a significant chance of reversal in the future.
The Company recognizes revenue in accordance with the core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer - A contract is an agreement between two or more parties that creates enforceable rights and obligations.
Step 2: Identify the performance obligations in the contract - A contract includes promises to transfer goods or services to a customer. If those goods or services are distinct, the promises are performance obligations and are accounted for separately.
Step 3: Determine the transaction price - The transaction price is the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The transaction price can be a fixed amount of customer consideration, but it may sometimes include variable consideration or consideration in a form other than cash. The transaction price also is adjusted for the effects of the time value of money if the contract includes a significant financing component and for any consideration payable to the customer. If the consideration is variable, an entity estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. The estimated amount of variable consideration will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
Step 4: Allocate the transaction price to the performance obligations in the contract - An entity typically allocates the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised in the contract. If a standalone selling price is not observable, an entity estimates it. Sometimes, the transaction price includes a discount or a variable amount of consideration that relates entirely to a part of the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation - An entity recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). The amount of revenue recognized is the amount allocated to the satisfied performance obligation. A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). For performance obligations satisfied over time, an entity recognizes revenue over time by selecting an appropriate method for measuring the entity's progress toward complete satisfaction of that performance obligation.

Interest income

Interest income on loans issued, trading securities and reverse repurchase agreement obligations is recognized based on the contractual provisions of the underlying arrangements.
10

Table of Contents
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)

Loan premiums and discounts are deferred and generally amortized into interest income as yield adjustments over the contractual life and/or commitment period using the effective interest method.

Unamortized premiums, discounts and other basis adjustments on trading securities are generally recognized in interest income over the contractual lives of the securities using the effective interest method.

Loans

The Company's loan portfolio is divided into three portfolio segments: credit cards, mortgages and retail banking loans. Credit cards consist of loans provided to individuals and businesses through the cards. Mortgage loans consist of loans provided to individuals to purchase real estate, which is used as collateral for the loan. Retail banking loans consist of unsecured loans provided to individuals.

Loans Acquired

All purchased loans are initially recorded at fair value, which includes consideration of expected future losses, at the date of the loan acquisition. To determine the fair value of loans at the date of acquisition, the Company estimates the discounted contractual cash flows due using an observable market rate of interest, adjusted for factors such as probable default rates of the borrowers, and the loan terms that a market participant would consider in determining fair value. In determining fair value, contractual cash flows are adjusted to include prepayment estimates based upon historical payment trends, forecasted default rates and loss severities and other relevant factors. The difference between the fair value and the contractual cash flows is recorded as a loan premium or discount, which may relate to either credit or non-credit factors, at acquisition.

The Company accounts for purchased loans under the accounting guidance for purchased financial assets with credit deterioration when, at the time of purchase, the loans have experienced a more-than-insignificant deterioration in credit quality since origination.

The Company recognizes an allowance for credit losses on purchased loans that have not experienced a more-than-insignificant deterioration in credit quality since origination at the time of purchase through earnings in a manner that is consistent with originated loans. The policies relating to the allowance for credit losses on loans is described below in the "Estimate of Incurred Loan Losses" section of this Note.

Estimate of Incurred Loan Losses

The allowance represents management's current estimate of incurred loan losses inherent in the Company's loan portfolio as of each balance sheet date. The provision for credit losses reflects credit losses the Company believes have been incurred and will eventually be recognized over time through charge-offs.

Management performed a quarterly analysis of the Company's loan portfolio to determine if impairment had occurred and to assess the adequacy of the allowance based on historical and current trends as well as other factors affecting credit losses. The Company applied separate calculations of the allowances for its credit cards, mortgages and retail loan portfolios. Based on the adopted methodology, the Company estimated the probability of default based on historical default rates, adjusted for certain macro indicators, such as GDP, average exchange rates, unemployment rate and real wage index. Loss given default is calculated based on the collateral coverage of the loans. The Company's allowance for loan losses consists of two components that are allocated to cover the estimated probable losses in each loan portfolio based on the results of the Company's detailed review and loan impairment assessment process: (i) a component for loans collectively evaluated for impairment; and (ii) an asset-specific component for individually impaired loans.
Derivative financial instruments
In the normal course of business, the Company invests in various derivative financial contracts including futures. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The fair values are estimated based on quoted market prices or pricing models that take into account the current market and contractual prices of the underlying instruments and other factors. Derivatives are carried as assets when their fair value is positive and as liabilities when it is negative.
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Table of Contents
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Functional currency
Management has adopted ASC 830, Foreign Currency Translation Matters as it pertains to its foreign currency translation. The Company's functional currencies are the Russian ruble, European euro, U.S. dollar, Ukrainian hryvnia, Uzbekistani som, Kazakhstan tenge, Kyrgyzstani som, Azerbaijani manat, Great Britain pound, Armenian dram, United Arab Emirates dirham and its reporting currency is the U.S. dollar. For financial reporting purposes, foreign currencies are translated into U.S. dollars as the reporting currency. Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of shareholders' equity as "Accumulated other comprehensive loss".
Cash and cash equivalents
Cash and cash equivalents are generally comprised of certain highly liquid investments with maturities of three months or less at the date of purchase. Cash and cash equivalents include reverse repurchase agreements which are recorded at the amounts at which the securities were acquired or sold plus accrued interest.
Securities reverse repurchase and repurchase agreements
A reverse repurchase agreement is a transaction in which the Company purchases financial instruments from a seller, typically in exchange for cash, and simultaneously enters into an agreement to resell the same or substantially the same financial instruments to the seller for an amount equal to the cash or other consideration exchanged plus interest at a future date. Securities purchased under reverse repurchase agreements are accounted for as collateralized financing transactions and are recorded at the contractual amount for which the securities will be resold, including accrued interest. Financial instruments purchased under reverse repurchase agreements are recorded in the financial statements as cash placed on deposit collateralized by securities and classified as cash and cash equivalents in the Condensed Consolidated Balance Sheets.
A repurchase agreement is a transaction in which the Company sells financial instruments to another party, typically in exchange for cash, and simultaneously enters into an agreement to reacquire the same or substantially the same financial instruments from the buyer for an amount equal to the cash or other consideration exchanged plus interest at a future date. These agreements are accounted for as collateralized financing transactions. The Company retains the financial instruments sold under repurchase agreements and classifies them as trading securities in the Condensed Consolidated Balance Sheets. The consideration received under repurchase agreements is classified as securities repurchase agreement obligations in the Condensed Consolidated Balance Sheets.
The Company enters into reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions to, among other things, acquire securities to leverage and grow its proprietary trading portfolio, cover short positions and settle other securities obligations, to accommodate customers' needs and to finance its inventory positions. The Company enters into these transactions in accordance with normal market practice. Under standard terms for repurchase transactions, the recipient of collateral has the right to sell or repledge the collateral, subject to returning equivalent securities on settlement of the transaction.
Available-for-sale securities
Financial assets categorized as available-for-sale ("AFS") are non-derivatives that are either designated as available-for-sale or not classified as (a) loans and receivables, (b) held to maturity investments or (c) trading securities.
Listed shares and listed redeemable notes held by the Company that are traded in an active market are classified as AFS and are stated at fair value. The Company has investments in unlisted shares that are not traded in an active market but that are also classified as investments AFS and stated at fair value (because Company management considers that fair value can be reliably measured). Gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in the Accumulated other comprehensive loss, with the exception of other-than-temporary impairment losses, interest calculated using the effective interest method, dividend income and foreign exchange gains and losses are recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income.
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FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments' revaluation reserve is then reclassified to net realized gain/(loss) on investments available for sale in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income.
Trading securities
Financial assets are classified as trading securities if the financial asset has been acquired principally for the purpose of selling it in the near term.
Trading securities are stated at fair value, with any gains or losses arising on remeasurement recognized in revenue. Changes in fair value are recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income and included in net gain on trading securities. Interest earned and dividend income are recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income and included in interest income, according to the terms of the contract and when the right to receive the payment has been established.
Investments in nonconsolidated managed funds are accounted for at fair value based on the net asset value of the funds provided by the fund managers with gains or losses included in net gain on trading securities in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income.
Margin lending
The Company engages in securities financing transactions with and for clients through margin lending. Under agreements, the Company is permitted to sell or repledge securities received as collateral and use these securities to secure securities acquired under resale agreements, enter into securities lending transactions or deliver these securities to counterparties to cover short positions.
Debt securities issued
Debt securities issued are initially recognized at the fair value of the consideration received, less directly attributable transaction costs. Subsequently, amounts due are stated at amortized cost and any difference between net proceeds and the redemption value is recognized over the period of the borrowings using the effective interest method. If the Company purchases its own debt it is removed from the Condensed Consolidated Balance Sheets and the difference between the carrying amount of the liability and the consideration paid is recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income.
Brokerage and other receivables
Brokerage and other receivables comprise commissions and receivables related to the securities brokerage and banking activity of the Company. At initial recognition, brokerage and other receivables are recognized at fair value. Subsequently, brokerage and other receivables are carried at cost net of any allowance for impairment losses.
Derecognition of financial assets
A financial asset (or, where applicable a part of a financial asset or a part of a group of similar financial assets) is derecognized where all of the following conditions are met:
The transferred financial assets have been isolated from the Company - put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership.
The transferee has rights to pledge or exchange financial assets.
The Company or its agents do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred assets.
Where the Company has not met the asset derecognition conditions above, it continues to recognize the asset to the extent of its continuing involvement.
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FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Impairment of long-lived assets
In accordance with the accounting guidance for the impairment or disposal of long-lived assets, the Company periodically evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the fair value from such asset is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost of disposal. As of March 31, 2022, the Company recognized write-off expenses of the client base that was recognized with the acquisition of Zerich in the amount of $3,125 due to economic uncertainty during the Company's fourth fiscal quarter stemming from the Russia/Ukraine Conflict. As of June 30, 2022, there were no write-offs performed.
Impairment of goodwill
As of June 30, 2022, and March 31, 2022, goodwill recorded in the Company’s Condensed Consolidated Balance Sheets totaled $5,932 and $5,898, respectively. The Company performs an impairment review at least annually unless indicators of impairment exist in interim periods. The impairment test for goodwill uses a two-step approach. Step one compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value exceeds the estimated fair value, step two must be performed. Step two compares the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized in an amount equal to the excess. In its annual goodwill impairment test, the Company estimated the fair value of the reporting unit based on the income approach (also known as the discounted cash flow method) and determined the fair value of the Company’s goodwill previously recognized for Freedom Bank RU, Freedom UA and Zerich is below of the carrying amount of the Company’s goodwill. The Company recognized impairment loss for the goodwill in the amount of $2,300 as of March 31, 2022, and presented goodwill, net of impairment loss in the Company's Condensed Consolidated Balance Sheets.
The goodwill value as of June 30, 2022, increased compared to March 31, 2022, due to foreign exchange currency translation.
The changes in the carrying amount of goodwill as of March 31, 2022, and for the quarter June 30, 2022, were as follows:
Amount
Balance as of March 31, 2022 (Recast)
$5,898 
Foreign currency translation34 
Balance as of June 30, 2022
$5,932 
Income taxes
The Company recognizes deferred tax liabilities and assets based on the difference between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.
Current income tax expenses are provided for in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. The Company accounts for income taxes using the asset and liability approach. Under this method, deferred income taxes are recognized for tax consequences in future years based on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry forwards.
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FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to affect taxable income.
The Company will include interest and penalties arising from the underpayment of income taxes in the provision for income taxes (if anticipated). As of June 30, 2022, and March 31, 2022, the Company had no accrued interest or penalties related to uncertain tax positions.
The Global Intangible Low-Taxed Income (“GILTI”) provisions of the Tax Reform Act require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company has presented the deferred tax impacts of GILTI tax in its Condensed Consolidated Balance Sheets as of June 30, 2022, and March 31, 2022.
Financial instruments
Financial instruments are carried at fair value as described below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. Fair value is the current bid price for financial assets, current ask price for financial liabilities and the average of current bid and ask prices when the Company is both in short and long positions for the financial instrument. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange or other institution and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
Leases
The Company follows ASU No. 2016-02, “Leases (Topic 842)”, which requires leases with durations greater than twelve months to be recognized on the balance sheet.
Operating lease assets and corresponding lease liabilities were recognized on the Company's Condensed Consolidated Balance Sheets. Refer to Note 21 Leases, to the condensed consolidated financial statements for additional disclosure and significant accounting policies affecting leases.
Fixed assets
Fixed assets are carried at cost, net of accumulated depreciation. Maintenance, repairs, and minor renewals are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range between three and seven years.
Insurance contract assets and liabilities
Insurance and reinsurance receivable
Insurance and reinsurance receivable is recognized when related income is earned and measured on initial recognition at the fair value of the consideration receivable. Subsequent to initial recognition, any insurance and reinsurance receivable is measured at cost net of any allowance for impairment losses.

Insurance and reinsurance payable

Payables on insurance business comprise advances received, amounts payable to insured (claims and premium refund payable) and amounts payable to agents and brokers, and advances received from insurers and reinsurers.

Payables on reinsurance business comprise net amounts payable to reinsurers. Amounts payable to reinsurers include ceded reinsurance premiums, assumed premium refunds and claims on assumed reinsurance. Insurance and reinsurance payable are accounted for at amortized cost.

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FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Unearned premium reserve and claims

Unearned premium is determined by the method of proportion for each contract, as the product of the insurance premium under the contract for the ratio of the expiration of the insurance cover (in days) to the balance sheet date (in days) from the date of recognition of the insurance premium in accounting as income until the end of the insurance coverage. The reinsurer's share in the unearned premium reserve is calculated separately for each insurance (reinsurance) contract and is determined as the ratio of the insurance premium under the reinsurance contract to the insurance premium under the insurance contract multiplied by the unearned premium reserve.

Results of insurance activity includes net written insurance premiums reduced by the net change in the unearned premium reserve, commissions recognized from assumed insurance and reinsurance contracts, claims paid net and net change in the loss reserves.

Net written insurance premiums represent gross written premiums less premiums ceded to reinsurers. Upon inception of a contract (except for classes of life and annuity insurance), premiums are recorded as written and are earned on a pro rata basis over the term of the related contract coverage. The unearned premium reserve represents the portion of the premiums written relating to the unexpired terms of coverage and is included in the accompanying statement of Condensed Consolidated Balance Sheets.

Unearned premium reserve relates to non-life insurance products and, non-annuity insurance products.

Claims are expensed to the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income as incurred.

Loss reserves

Non-life and annuity insurance

Loss reserves are a summary of estimates of ultimate losses, and include both claims reported but not settled (RBNS) and claims incurred but not reported (IBNR). RBNS is created for existing reported claims not settled at the reporting date. Estimates are made on the basis of information received by the Company during its investigation of insured events. IBNR is estimated by the Company based on its previous history of reported/settled claims using actuarial methods of calculation, which include claim development triangles for insurance classes with sufficient claims statistics.

Reinsurance assets in IBNR are estimated applying the same actuarial method used in IBNR estimation.

Life insurance

Not incurred claims reserves (NIC) on life insurance contracts equal the NIC amount for all life insurance contracts valid as at the reporting date. NIC reserve on a separate contract of life insurance, except for the insurance contract with policyholder's participation in investments, is equal to the maximum value of the net level premium reserve and gross-premium reserve. Net level premium reserve is the present value of future benefits (excluding survival benefits) less present value of future net premiums. Gross-premium reserve is present value of benefits, expenses of the Company that are directly related to consideration, settlement, and determination of the benefit amount, operating expenses of the
Company related to conducting of the business, less present value of future gross-premiums.

Annuity insurance

NIC reserve on annuity contracts is the sum of the present value of future benefits, the claims for annuity insurance and administrative expenses on annuity insurance contracts maintenance, less the present value of insurance contributions (in case of lump sum - insurance premium), which the Company is due to receive after the settlement date.
The reserves are either based on current assumptions or calculated using the assumptions established at the time the contract was issued, in which case a margin for risk and adverse deviation is generally included.
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FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Segment information
Historically, the Company's chief operating decision maker ("CODM"), who is its chief executive officer, viewed the Company as a single operating segment offering financial services to its customers in a single geographic region covering Eurasia. The CODM recently, however, restructured the Company's operations into five geographical regions ("segments"). These regions include Central Asia, Europe, the U.S., Russia and Middle East/Causcasus.
In order to determine appropriate segment disclosure as stated in ASC 280-10-55-26 the Company followed the steps outlined below:

identified operating segments using the management approach;
determined whether two or more operating segments may be aggregated into a single operating segment;
applied the quantitative thresholds and other criteria to determine reportable segments;
considered what information should be disclosed for each reportable segment; and
considered what information should be disclosed on an entity-wide basis.
Recent accounting pronouncements

In June 2016 the FASB issued Accounting Standards Update No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. That methodology replaces the probable, incurred loss model for those assets. In November 2019, the FASB issued ASU 2019-10 "Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)". The Board developed a philosophy to extend and simplify how effective dates are staggered between larger public companies (bucket one) and all other entities (bucket two). Those other entities include private companies, smaller public companies, not-for-profit organizations, and employee benefit plans. Under this philosophy, a major update would first be effective for bucket-one entities, that is, public business entities that are SEC filers, excluding entities eligible to be smaller reporting companies (SRCs) under the SEC's definition. The Master Glossary of the Codification defines public business entities and SEC filers. All other entities, including SRCs, other public business entities, and nonpublic business entities (private companies, not-for-profit organizations, and employee benefit plans) would compose bucket two. For those entities, it is anticipated that the Board will consider requiring an effective date staggered at least two years after bucket one for major updates. The Company is currently evaluating the impact that ASU 2016-13 and 2017-12 will have on its condensed consolidated financial statements and related disclosures.

In August 2021 the FASB issued Accounting Standard Update No 2021-06 "Presentation of Financial Statements (Topic 205), Financial Services — Depository and Lending (Topic 942), and Financial Services — Investment Companies (Topic 946)" which amends various SEC paragraphs pursuant to the issuance of SEC Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses. SEC issued Final Rulemaking Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, which modified the disclosure and presentation requirements concerning acquisitions and disposals of businesses. Primarily, the new rules amended (1) Rule 1-02(w) of Regulation S-X, Definition of Terms Used in Regulation S-X, Significant Subsidiary, (2) Rule 3-05 of Regulation S-X, Financial Statements of Businesses Acquired or to Be Acquired, (3) Rule 8-05 of Regulation S-X, Pro Forma Financial Information (which covers smaller reporting companies), and (4) Article 11 of Regulation S-X, Pro Forma Financial Information. In addition, new Rule 6-11 of Regulation S-X, Financial Statements of Funds Acquired or to Be Acquired, covering acquisitions specific to investment companies, was added. Corresponding changes were made to other Regulation S-X rules, various Securities Act and Securities Exchange Act rules, and Forms 8-K and 10-K. Compliance with the amended rules is required from the beginning of a registrant's fiscal year commencing after December 31, 2020 (i.e., the mandatory compliance date). Acquisitions and dispositions that are probable or consummated after the mandatory compliance date are required to be evaluated for significance pursuant to the amended rules. Early compliance is permitted, provided that all the amended rules are applied in their entirety from the early compliance date. ASU No. 2021-06 amends SEC material in the Codification to give effect to Release No. 33-10786. The new rules apply to fiscal years ending on or after December 15, 2021 (i.e., calendar-year 2021). Early voluntary compliance is allowed. Note that the rescission of Industry Guide 3 is effective on January 1, 2023. ASU No. 2021-06 amends SEC material in the Codification to give effect to Release No. 33-10835. The Company does not expect that the ASU 2021-06 will significantly impact on consolidated financial statements and related disclosures.

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FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
In October 2021 the SEC issued the amendment of Compensation-Stock Compensation No. 2021-07, Determining the Current Price of an Underlying Share for Equity-Classified Share-Based Awards a consensus of the Private Company Council. The main amendments were concentrated in add paragraphs 718-10-30-20C through 30-20H and their related heading, with a link to transition paragraph 718-10-65-16, in which as a practical expedient, a nonpublic may use a value determined by the reasonable application of a reasonable valuation method as the current price of its underlying share for purposes of determining the fair value of an award that is classified as equity in accordance with paragraphs 718-10-25-6 through 25-18 at grant date or upon a modification. Moreover, in the topic was amended paragraph 718-10-50-2(f), with a link to transition paragraph 718-10-65-16, which states that listed requirements indicates the minimum information needed to achieve the objectives in paragraph 718-10-50-1 and illustrates how the disclosure requirements might be satisfied. In some circumstances, an entity may need to disclose information beyond the following to achieve the disclosure objectives. Firstly, a description of the method used during the year to estimate the fair value (or calculated value) of awards under share-based payment arrangements. Secondly, a description of the significant assumptions used during the year to estimate the fair value (or calculated value) of share-based compensation awards, including: i. Expected term of share options and similar instruments, including a discussion of the method used to incorporate the contractual term of the instruments and grantees' expected exercise and post vesting termination behavior into the fair value of the instrument. ii. Expected volatility of the entity's shares and the method used to estimate it. An entity that uses a method that employs different volatilities during the contractual term shall disclose the range of expected volatilities used and the weighted-average expected volatility. iii. Expected dividends. iv. Risk-free rate(s). v. Discount for post vesting restrictions and the method for estimating it. vi. Practical expedient for current price input. The topic also contains added paragraph 718-10-65-16, that illustrates the transition and effective date information related to Accounting Standards Update No. 2021-07 by the listed requirement: a. The pending content that links to this paragraph shall be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. b. An entity shall apply the pending content that links to this paragraph prospectively. Early application, including application in an interim period, is permitted for financial statements that have not been issued or made available for issuance as of October 25, 2021. The amendments in this Update apply to all nonpublic entities that issue equity-classified share-based awards and elect the practical expedient in this Update. Thus, ASU 2021-06 will not impact consolidated financial statements and related disclosures.
In October 2021 the SEC issued the amendment of Business Combinations (Topic 805), No. 2021-08, which related to Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The main amendments were concentrated in paragraphs 805-20-25-16 through 25-17 and add paragraph 805-20-25-28C and its related heading, with a link to transition paragraph 805-20-65-3, where the topic provides limited exceptions to the recognition and measurement principles applicable to business combinations. Moreover, the topic amends paragraphs 805-20-30-10 through 30-12 and add paragraphs 805-20-30-27 through 30-30 and their related heading, with a link to transition paragraph 805-20-65-3. Paragraph 805-20-25-16 notes that the Business Combinations Topic provides limited exceptions to the recognition and measurement principles applicable to business combinations. In the topic has been added paragraph 805-20-65-3, in which the following represents the transition and effective date information related to Accounting Standards Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers: a. For public business entities, this paragraph shall be effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating the impact that ASU 2021-06 will have on its consolidated financial statements and related disclosures.

In March 2022 the FASB issued Accounting Standards Update No. 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method", which introduces the amendments, which targeted on improvements to the optional hedge accounting model with the objective of improving hedge accounting to better portray the economic results of an entity's risk management activities in its financial statements. The amendments in this Update apply to the Company that elect to apply the portfolio layer method of hedge accounting in accordance with Table of Contents Topic 815. For a closed portfolio of prepayable financial assets or one or more beneficial interests secured by a portfolio of prepayable financial instruments, the last-of-layer method allows an entity to hedge a stated amount of the asset or assets in the closed portfolio that is anticipated to be outstanding for the designated hedge period. If the requirements for the last-of-layer method are met, prepayment risk is not incorporated into the measurement of the hedged item. Accordingly, ASU 2022-01 is effective for fiscal years beginning after December 15, 2022. ASU 2022-01 will not have an impact on the Company's consolidated financial statements and related disclosures.

In March 2022 the FASB issued Accounting Standards Update No. 2022-02, "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures", which introduces the amendments on solving two issues of creditors related to troubled debt restructurings and gross write-offs of vintage debt disclosures. The amendments in Update 2016-13 require that an entity measure and record the lifetime expected credit losses on an asset that is within the scope of the Update upon origination or acquisition, and, as a result, credit losses from loans modified as troubled debt restructurings (TDRs) have been incorporated into the allowance for credit losses. Investors and preparers observed that the additional designation of a loan modification as a TDR and the related accounting are unnecessarily complex and no longer provide decision-useful information.
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FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Moreover, Investors and other financial statement users observed that disclosing gross write-offs by year of origination provides important information that allows them to better understand changes in the credit quality of an entity's loan portfolio and underwriting performance. Accordingly, ASU 2022-02 is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact that ASU 2022-02 will have on its consolidated financial statements and related disclosures.

In June 2022 FASB Issued Accounting Standard Updated No. 2022-03 “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB has issued this standard to (1) clarify the guidance in Topic 820 – Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this Update affect all entities that have investments in equity securities measured at fair value that are subject to a contractual sale restriction. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact that ASU 2022-03 will have on its consolidated financial statements and related disclosures.

NOTE 3 – RECAST
When preparing the condensed consolidated financial statements as of and for the three months ended June 30, 2022, management determined that certain amounts included in the Company’s condensed consolidated financial statements as of March 31, 2022, required revision due to the closing of the acquisition of Freedom Life and Freedom Insurance in May 2022, which were deemed to be entities under common control with the Company since 2018. For additional information see Note 22 Acquisitions and Disposals of Subsidiaries to the condensed consolidated financial statements.

As required by ASC 805 Business Combinations, acquisitions with parties under common control are required to have all previously presented periods recast to the date of acquisition.

The previously issued Condensed Consolidated Balance Sheet as of March 31, 2022, and Condensed Consolidated Statement of Operations and Statements of Other Comprehensive Income for the three months ended June 30, 2022, have been revised as follows:
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FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
As of March 31, 2022
As previously reportedRecastAs recasted
ASSETS
Cash and cash equivalents$625,547 $816 $626,363 
Restricted cash553,680  553,680 
Trading securities1,203,479 77,395 1,280,874 
Available-for-sale securities, at fair value1 161,363 161,364 
Brokerage and other receivables, net357,567 179 357,746 
Loans issued94,797 43 94,840 
Fixed assets, net21,365 437 21,802 
Intangible assets, net5,791 1,650 7,441 
Goodwill5,388 510 5,898 
Right-of-use asset15,669 684 16,353 
Deferred tax assets12,018 51 12,069 
Assets from insurance activity  5,712 5,712 
Other assets, net25,707 7,643 33,350 
TOTAL ASSETS$2,921,009 $256,483 $3,177,492 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Securities repurchase agreement obligations$775,178 $97,514 $872,692 
Customer liabilities1,417,937 (983)1,416,954 
Trade payables45,229 1 45,230 
Liabilities from insurance activity  119,490 119,490 
Current income tax liability14,556  14,556 
Securities sold, not yet purchased – at fair value14,103  14,103 
Loans received3,538  3,538 
Debt securities issued99,027  99,027 
Lease liability15,315 720 16,035 
Deferred distribution payments8,534  8,534 
Other liabilities19,917 808 20,725 
TOTAL LIABILITIES2,413,334 217,550 2,630,884 
Commitments and Contingent Liabilities (Note 20)   
SHAREHOLDERS’ EQUITY
Preferred stock - $0.001 par value; 20,000,000 shares authorized, no shares issued or outstanding
   
Common stock - $0.001 par value; 500,000,000 shares authorized;
59  59 
Additional paid in capital141,340 33,406 174,746 
Retained earnings426,563 15,360 441,923 
Accumulated other comprehensive loss(53,291)(9,834)(63,125)
TOTAL EQUITY ATTRIBUTABLE TO THE COMPANY514,671 38,932 553,603 
Less: Net (loss)/income attributable to noncontrolling interest in subsidiary(6,996)1 (6,995)
TOTAL SHAREHOLDERS’ EQUITY507,675 38,933 546,608 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$2,921,009 $256,483 $3,177,492 

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FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Three months ended June 30, 2021
As previously reportedRecastAs recasted
Revenue:
Fee and commission income$97,406 $(23)$97,383 
Net gain on trading securities9,900 841 10,741 
Net realized loss on investments available for sale (31)(31)
Interest income18,077 6,585 24,662 
Income from insurance activity 14,076 14,076 
Net gain/(loss) on foreign exchange operations(1,187)163 (1,024)
Net loss on derivative(59)(1)(60)
TOTAL REVENUE, NET124,137 21,610 145,747 
Expense:
Fee and commission expense21,863 1,397 23,260 
Interest expense14,272 2,223 16,495 
Expense from insurance activity 11,296 11,296 
Operating expense30,318 2,926 33,244 
Provision for impairment losses293  293 
Other expense, net14 111 125 
TOTAL EXPENSE66,760 17,953 84,713 
NET INCOME BEFORE INCOME TAX$57,377 $3,657 $61,034 
Income tax expense(5,669)5 (5,664)
NET INCOME$51,708 $3,662 $55,370 
Less: Net loss attributable to non-controlling interest in subsidiary(52) (52)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS51,760 3,662 55,422 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect 874 874 
Reclassification adjustment relating to available-for-sale investments disposed of in the period, net of tax effect 31 31 
Foreign currency translation adjustments, net of tax effect3,300 (278)3,022 
OTHER COMPREHENSIVE INCOME3,300 627 3,927 
COMPREHENSIVE INCOME BEFORE NON-CONTROLLING INTERESTS$55,008 $4,289 $59,297 
Less: Comprehensive loss attributable to non-controlling interest in subsidiary(52) (52)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$55,060 $4,289 $59,349 

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FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
NOTE 4 – CASH AND CASH EQUIVALENTS
As of June 30, 2022, and March 31, 2022, cash and cash equivalents consisted of the following:
 
June 30, 2022
March 31, 2022
 (Recast)
Securities purchased under reverse repurchase agreements$319,799 $278,685 
Current accounts in clearing organizations209,233 78,177 
Current accounts with commercial banks101,547 68,933 
Petty cash in bank vault and on hand74,685 37,148 
Current account with National Bank (Kazakhstan) 64,416 42,517 
Current account with National Settlement Depository (Russia)52,953 35,860 
Current accounts with brokers31,110 65,085 
Accounts with stock exchanges 25,827 11,791 
Current account with Central Bank (Russia)16,923 3,654 
Cash in transit9,151 4,177 
Current account with Central Depository (Kazakhstan)41 336 
Total cash and cash equivalents$905,685 $626,363 
As of June 30, 2022, and March 31, 2022, with the exception of funds deposited with a bank in the United States which may qualify for FDIC insurance up to $250,000, cash and cash equivalents were not insured. As of June 30, 2022, and March 31, 2022, the cash and cash equivalents balance included collateralized securities received under reverse repurchase agreements on the terms presented below:
June 30, 2022
Interest rates and remaining contractual maturity of the agreements
Average interest rate
Up to 30 days30-90 daysTotal
Securities purchased under reverse repurchase agreements
   
Corporate equity2.14 %$307,522 $ $307,522 
Corporate debt12.68 %6,290  6,290 
US sovereign debt16.50 %3,554  3,554 
Non-US sovereign debt13.77 %2,409 24 2,433 
Total securities sold under repurchase agreements$319,775 $24 $