SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting principles
The Group's accounting policies and accompanying consolidated financial statements conform to accounting principles generally accepted in the United States of America (U.S. GAAP).
Basis of presentation and principles of consolidation
The consolidated financial statements present the consolidated accounts of FRHC and its consolidated subsidiaries. All inter-company balances and transactions have been eliminated from the consolidated financial statements.
Prior Period Reclassifications
Certain prior-period amounts have been reclassified and disaggregated to conform to the current-period presentation. In the consolidated statements of cash flows, purchases of intangible assets are now presented separately within cash flows from investing activities. This is a presentation reclassification/disaggregation rather than a change in accounting principle or an
error correction, as it did not affect previously reported net income, comprehensive income, total assets, total liabilities, equity, or net cash provided by or used in operating, investing or financing activities.
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. As of March 31, 2026 there are no VIEs in respect of the Company.
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 Group's financial statements are reasonable and prudent. Actual results could differ from those estimates.
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 Group's revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as loans and investment securities, insurance revenue, as these activities are subject to other U.S. GAAP guidance discussed elsewhere within these disclosures. Descriptions of the Group's revenue-generating activities that are within the scope of ASC Topic 606, which are presented in the Consolidated Statements of Operations and Statements of Other Comprehensive Income as components of total revenue, net are as follows:
• Commissions on brokerage services;
• Commissions on banking services (money transfers, foreign exchange operations and other);
• Agency fee commissions (the Company earns agency fee commissions through its facilitation of transactions between customers);
• Commissions on payment processing; and
• Commissions on investment banking services (such as underwriting and market making services).
The Group launched a cashback-based loyalty program, according to which cashback is provided for purchases made with Bank's card, depending on the customer loyalty-level. If cash or another form of consideration provided to a customer, the Group reduces the transaction price.
Concentrations of Revenue
Revenues from one customer of the Group's Brokerage segment represents the following amount of the Group's consolidated revenues:
For the fiscal years ended March 31, 2026, March 31, 2025 and March 31, 2024 the amounts in the table above included fee and commission income earned from one customer in the amount of $345,523, $284,728 and $196,663, respectively and interest income from margin loans to customer in the amount of $21,443, $32,808 and $99,594, respectively.
Transaction-Based Revenues
The Company earns transaction-based revenue by routing and executing customer orders in equities, options, fixed-income securities and other exchange-traded products. Individual customer trade orders may be executed within our omnibus accounts with third party brokers resulting in simultaneous buy and sell orders on the same security being issued to the third party brokers. The Company's single performance obligation to each customer is satisfied at the point in time each individual order is executed, which is when the customer obtain substantially all of the benefits from the services. The transaction price is established at execution and consists of per-instrument or per-contract commissions and a fixed percentage of the notional trade value.
Gross versus net revenue
ASC 606 provides guidance on proper recognition of principal versus agent considerations which is used to determine gross versus net revenue recognition. Under ASC 606, the core objective of the guidance on gross versus net revenue recognition is to help determine whether the Group is a principal or an agent in a transaction. In general, the primary difference between these two is the performance obligation being satisfied. The principal has a performance obligation to provide the desired goods or services to the end customer, whereas the agent arranges for the principal to provide the desired goods or services. Additionally, a fundamental characteristic of a principal in a transaction is control. A principal substantively controls the goods and services before they are transferred to the customer as well as controls the price of the good or service being provided. An agent normally receives a commission or fee for these activities. In addition to control, the level at which the Group controls the price of the good or service being transferred determines principal versus agent status. The more discretion over setting price a Group has in providing the good or service, the more likely they are considered a principal rather than an agent.
In certain cases, other parties are involved with providing products and services to Freedom's customers. If Freedom is principal in the transaction (providing goods or services itself), revenues are reported based on the gross consideration received from the customer and any related expenses are reported gross in non interest expense. If Freedom is an agent in the transaction (arranging for another party to provide goods or services), the Group reports its net fee or commission retained as revenue.
Based on the contractual arrangements with customers, the Company acts as an agent on behalf of its clients by facilitating customers to enter into long and short positions within the Company's omnibus accounts. The Company facilitates the purchase and sale of securities and securities lending transactions through its platforms by routing purchases and sales transactions from its customers, including the market-making customer through its prime brokers. All the customers, including the market-making customer, act on a principal basis and assume the associated market and counterparty risks of their respective positions. The Company does not act as a counterparty to its clients’ buy or sell transactions but may provide them with margin loans and securities lending transactions. The Company's clients have control of the securities they transact on the Company's platforms, including those that collateralize margin loans, and, as a result, such securities are not presented on the Company's Consolidated Balance Sheets.
Interest income
Interest income on margin loans, loans issued, trading securities, available-for-sale securities, held-to-maturity securities, and reverse repurchase agreement obligations are recognized based on the contractual provisions of the underlying arrangements.
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.
The Group suspends accrual of interest income for the loans which meet the impairment criteria. Interest income is not accrued on margin lending receivables in case value of collateral is not sufficient or less than margin loan amount.
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.
Interest income from marginal lending includes income accrued on off-balance sheet arrangements, which mainly include repurchase agreements of the Group's brokerage customers.
Loans
The Group's loan portfolio is divided into: mortgages, corporate loans, loans to small and medium-sized enterprises (“SME”), purchased retail loans, car loans, retail loans and other loans. Mortgage loans consist of loans provided to individuals to purchase residential properties, which is used as collateral for the loan. Margin loans are not classified as part of the Group's loan portfolio and are instead recorded on the Consolidated Balance Sheets under Margin lending, brokerage and other receivables, net. Additionally, most of our mortgage loans, corporate loans, loans to SME, car loans, and retail loans are digital in nature.
A loan becomes delinquent when the borrower doesn't fulfill its obligations to the Group to repay the loan on time according to the agreement.
Write-off
Loans are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to expected credit loss expense.
The loan or part of the loan can be fully or partially written off in the following cases:
•death of the borrower;
•bankruptcy of the borrower;
•entry into force of a court decision on refusal or partial satisfaction of the Group's claims for debt collection;
•conversion of the pledged property into the ownership of the Group;
•assignment by the Group of its rights of claim to third parties.
Modifications
Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions.
The Group derecognizes loan when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognized as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded. When assessing whether or not to derecognize a loan to a customer, amongst others, the Group considers the following factors: change in currency of the loan, change in counterparty and modifications.
Allowance for credit losses
The Group maintains an allowance for credit losses (ACL) for financial assets measured at amortized cost. The ACL mainly consists of the allowance for loan losses, and the allowance for credit losses for available-for-sale securities. The estimate of expected credit losses under the current expected credit losses (CECL) methodology adopted on April 1, 2023 is based on relevant information about the past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.
Allowance for credit losses - Loans
The ACL is a valuation account that is deducted from the amortized cost of total loans to present the net amount expected to be collected on the loans.
Under CECL, the Group's methodology to establish the allowance for loan losses has two basic components: (1) a collective CECL component for estimated expected credit losses for pools of loans that share common risk characteristics and (2) an individual CECL component for loans that do not share common risk characteristics.
Management estimates the allowance balance using relevant and available information from internal and external sources, relating to past events, including historical trends in loan delinquencies and charge offs, current conditions, and reasonable and supportable forecasts.
Allowance for credit losses for loans that share common risk characteristics
Pooling loans with common risk characteristics for estimating allowance for credit losses is primarily based on the segmentation by product type and the type of collateral provided. The Group estimates current expected credit loss for loans with common risk characteristics using the PD/LGD methodology, which is based on relevant information about historical experience, current conditions, as well as reasonable forecasts that allow estimating the Group's potential losses on the loan portfolio.
In assessing the Probability of Default (PD) for loans with common risk characteristics, the Group uses average monthly loan balance flowing across delinquency buckets preferably over a period of five years or more. Based on the weighted average maturity of loans with common risk characteristics, using the Markov chain method, the proportion of possible loan agreements with overdue debts over 90 days is determined, based on factual calculations, which are used to determine the PD for a pool of loans. If there are no own statistics, then the calculation of PD is carried out on the basis of statistics of State Credit Bureau JSC on past events for a period of five or more years. The resulting PD indicator is adjusted for qualitative or internal and external environmental factors not considered within the model, but which are relevant in estimating the expected credit losses within the loan portfolio. The macroeconomic indicators impacting the expected risk of loss within the loan portfolios may include the following: GDP, Brent oil price, inflation, base interest rate and exchange rate. These macroeconomic indicators are recalculated once per year, used throughout the year and for all loan types. For defaulted loans, PD of 100% is applied, for non-impaired loans PD for the average life of the pool is recognized at inception.
In order to estimate the loss given default (LGD) for loans with common risk characteristics, the Company uses collateral valuations for secured loans and historical data on recoveries through cash repayments of defaulted loans for unsecured loans. For secured loans the Company takes into account the latest market value of the collateral on the calculation date. First, liquidity ratios are applied to market values based on the type of collateral, after which the value of the collateral is discounted at the original effective interest rate of the loan agreement for the risk periods corresponding to the types of collateral. The LGD calculation methodology is the same for both non-impaired and defaulted secured loans. For unsecured loans, the Group uses the average monthly share of repayments of defaulted loans over the past 5 years, discounted back at the weighted average effective interest rate. If there are no sufficient own statistics, then the calculation of LGD is carried out on the basis of statistics of State Credit Bureau JSC on past events for a period of five or more years.
The described above PD/LGD approach apply for all type of loans, as well as non-impaired and defaulted.
Allowance for credit losses for loans that do not share common risk characteristics
Loans that do not share similar risk characteristics with any pools of assets are subject to individual evaluation and are removed from the collectively assessed pools. Loans that are individually evaluated for collectability are reviewed based on an assessment of the financial condition of the borrower, taking into account the most possible debt repayment scenarios: due to expected cash flows from operating activities, cash available from guarantors, founders, shareholders, investors, related companies, other confirmed cash flows, restructuring of the borrower's obligations and the sale of collateral. Depending on the loan maturity date, the expected cash flows are discounted at the original effective interest rate and allowance for credit losses are calculated as the difference between the discounted expected cash flows and outstanding balance of the loan. If repayment of the debt is deemed impossible, based on the expected cash flows, the Group accrues allowance for credit losses in the amount of 100% of the loan balance.
Loan portfolio risk elements and credit risk management
Credit risk management. When implementing credit risk management processes, the Group is guided by internal policies and procedures, which define the main goals, objectives, principles, priority areas for the formation of an internal effective credit risk management system that corresponds to the current market situation and the Group's development strategy, and ensures effective identification, measurement, monitoring and control of the Group's credit risk. In order to minimize credit risk, the Group has developed procedures for managing internal risk appetite limits for currencies, countries, sectors of the economy, business categories and products, types of collateral, concentration of risk on the top 20 borrowers, debts of a group of related borrowers, etc. Control over the level of limits on credit risk is carried out by the Group's dedicated credit risk team through the preparation of monthly management reports, which include, but are not limited to, information on the quality of the loan portfolio, its classification in accordance with the requirements of reporting standards, on the amount of exposure to credit risk, including a group of related borrowers, on the concentration of credit risk of the largest borrowers and borrowers as related parties to the Group, on the internal rating of borrowers, etc. When analyzing a borrower, the Group uses the following information to assess creditworthiness: the borrower's existing loans, the presence of overdue debt, income, age, work experience and dynamics of credit behavior.
Mortgage loans. The Group provides mortgage loans for the purchase of real estate in both the primary and secondary markets. This is done through the Group's own and government lending programs, relevant lending products as described in the Group's internal normative documents. The main share of the Group's loan portfolio is represented by mortgage loans issued within the framework of state support programs, funded from the funds of quasi-state organizations. Valuation of real estate collateral is carried out directly by independent appraisal companies with subsequent confirmation by the Group's collateral service. The collateral policy and methodology of the process for working with collateral comply with the regulatory requirements of the regulator and the banking legislation of the country. In the process of making decisions on the solvency and creditworthiness of borrowers, an automatic check is carried out through external and internal databases. To do this, the results of both the Group's own and third-party credit scoring models are taken into account. The Group does not use third party loan underwriting services. Residential mortgages include only fixed rate loans secured by real estate purchases. When making a decision to issue a mortgage on housing, the Group takes into account the qualifications of the borrower, as well as the value of the underlying property.
Car loans. When making decisions on car loans, the Group uses both evaluation and scoring systems. The Group provides loans for the purchase of motor vehicles both under the C2C scheme and under the B2C scheme with the participation of car dealerships. The decision-making process includes the use of data from credit bureaus, government databases and other sources of information. This allows not only to assess the financial capacity of a potential borrower, but also to evaluate the purchased vehicle. Machine learning models have also been introduced that analyze data about the cars themselves and sellers. This allows to automatically screen out applications with high potential credit risk.
Corporate loans. Corporate loans consist of loans provided to corporate borrowers primarily for working capital, investment, capital expenditure and other business financing purposes. Corporate loans may be structured as term loans, credit lines or other commercial lending products and may be secured or unsecured depending on the borrower’s credit profile, repayment capacity and approved credit terms. The Group evaluates corporate borrowers based on their financial condition, cash flows, business activity, repayment capacity, credit history, industry risk, collateral coverage, guarantees, compliance with contractual covenants and other relevant credit risk indicators. Corporate loans are monitored through periodic credit reviews, analysis of repayment performance, updated borrower financial information, collateral monitoring and other information indicating changes in credit risk. Corporate loans are generally secured by real estate, cash deposits, securities, guarantees or other collateral.
Purchased retail loans. Purchased retail loans consist of unsecured consumer loans and related rights of claim to individuals that were originated by third-party or related-party financial institutions and subsequently acquired by the Group through assignment, cession or similar purchase arrangements. Purchased retail loans include loans historically acquired from Microfinance Organization Freedom Finance Credit LLP and recognized within loans issued following the termination or release of the related cession and credit-protection arrangements, as well as other retail loans that may be acquired by the Group. Purchased retail loans are recognized when the Group obtains the contractual rights to receive cash flows from the underlying borrowers and assumes the related credit risk. Purchased retail loans are recorded within loans issued and are subsequently accounted for in accordance with the Group’s policies applicable to loans measured at amortized cost. Any purchase discount, premium or other purchase-related adjustment is considered in determining the carrying amount of the purchased loan and is recognized over the expected life of the loan, as applicable. The Group
evaluates purchased retail loans based on the credit characteristics of the underlying borrowers, payment history, delinquency status, expected recoveries, historical loss experience and other relevant credit risk indicators. Purchased retail loans are monitored for delinquency, write-off and expected credit losses in accordance with the Group’s credit risk management and allowance for credit loss policies applicable to its loan portfolio.
Loans to SME. The Group provides loans to small and medium-sized enterprises and individual entrepreneurs for working capital, business development and other commercial purposes. Loans to SME may be issued under the Group’s own lending programs or, where applicable, under government or quasi-governmental programs, including programs with subsidized interest rates or partial credit support. Loans to SME may be unsecured or secured, depending on the borrower’s credit profile, product terms and approved credit structure. Collateral, where obtained, may include guarantees, cash deposits, highly liquid financial assets or other collateral acceptable under the Group’s credit policies. Collateral requirements and loan limits are established at origination and monitored in accordance with the Group’s credit risk management procedures. Loans to SME are recorded within loans issued and are subsequently measured at amortized cost, net of allowance for credit losses.
Retail loans. Retail loans consist of loans issued to individuals for consumer and other personal purposes, excluding mortgage loans, car loans and purchased retail loans, which are presented separately. Retail loans include unsecured consumer loans, credit card-related exposures and other retail banking loans originated by the Group. Certain retail loans may also be secured by cash deposits, highly liquid financial assets, guarantees or other eligible collateral, depending on the product type and approved credit terms. The Group makes retail lending decisions based on internal scoring models, credit bureau data, customer income, repayment history, behavioral data, information from official sources and other relevant credit risk indicators. The Group also considers applicable regulatory requirements, including limits on the borrower’s debt service burden. If the borrower does not satisfy the Group’s credit criteria or applicable regulatory requirements, the loan application is rejected. Retail loans are issued under the Group’s own lending programs and, where applicable, under government or subsidized lending programs. Retail loans are recorded within loans issued and are subsequently measured at amortized cost, net of allowance for credit losses.
Derivative financial instruments
The Group enters into derivatives, such as foreign currency swaps, to diversify its funding sources and manage foreign currency risk; the Group does not use derivatives for trading purposes, to generate income or to engage in speculative activity. The Group enters into derivatives that not designated in hedging relationships under ASC 815, the fair value adjustments are recorded in gain (loss) on derivative instruments and trading securities, net. Derivatives in a gain position are reported as derivative assets at fair value and derivatives in a loss position are reported as derivative liabilities at fair value in our consolidated balance sheets. In our consolidated statements of cash flows, cash receipts and payments related to derivative instruments are classified according to the underlying nature or purpose of the derivative transaction, generally in the investing section for derivatives not designated in hedging relationships.
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 Kazakhstan tenge, the euro, the U.S. dollar, the Uzbekistani sum, the Kyrgyzstani som, the Azerbaijani manat, the British pound sterling, the Armenian dram, the United Arab Emirates dirham and the Turkish lira, 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 quarterly 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". The Group uses exchange rates from the NBK for foreign currency translation purposes.
Cash and cash equivalents
Cash and cash equivalents are generally comprised of cash and certain highly liquid investments with original maturities of three months or less at the date of purchase. Cash and cash equivalents include reverse repurchase agreements with a
maturity of less than 90 days and where the credit risk of the counterparty is low, which are recorded at the amounts at which the securities were acquired plus accrued interest.
Securities reverse repurchase and repurchase agreements
A reverse repurchase agreement is a transaction in which the Group 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 Consolidated Balance Sheets.
A repurchase agreement is a transaction in which the Group 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 Group retains the financial instruments sold under repurchase agreements and classifies them as trading securities in the Consolidated Balance Sheets. The consideration received under repurchase agreements is classified as securities repurchase agreement obligations in the Consolidated Balance Sheets.
The Group 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 asset positions. The Group 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.
Restricted cash
Restricted cash consists of cash and cash equivalents that are held for specific reasons and not available for immediate use. Certain subsidiaries of the Group are obligated by rules and regulations mandated by their primary regulators to segregate or set aside certain customer cash in the interests of protecting customer assets. Restricted cash is mainly represented by customer cash and guaranty deposits, which are restricted in use by the Group for more than three months.
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.
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, and foreign exchange gains and losses are recognized in the Consolidated Statements of Operations and Statements of Other Comprehensive Income. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the accumulated other comprehensive (loss)/income is then reclassified to net realized gain/(loss) on investments available-for-sale in the 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 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
Consolidated Statements of Operations and Statements of Other Comprehensive Income and included in interest income and other income, respectively, 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 Consolidated Statements of Operations and Statements of Other Comprehensive Income.
Held-to-maturity securities
Financial assets are classified as held-to-maturity ("HTM") when the Group has the positive intent and ability to hold the securities to maturity. HTM securities are non-derivative debt instruments that are measured at amortized cost using the effective interest method, less any allowance for expected credit losses.
Interest income on HTM securities is recognized in the Consolidated Statements of Operations and Statements of Other Comprehensive Income using the effective interest method. Changes in fair value are not recognized in the consolidated financial statements as long as the investment continues to meet the criteria for held-to-maturity classification. However, the fair value of HTM securities is disclosed in the notes to the consolidated financial statements.
Management estimates expected credit losses at each reporting date and records any increase or decrease in the allowance through "Allowance for expected credit losses" in the Consolidated Statements of Operations and Statements of Other Comprehensive Income. The security's amortized cost basis is not written down unless the security is either sold or determined to be uncollectible. Because HTM securities are not remeasured to fair value, unrealized changes in fair value that are unrelated to credit risk are not recognized in either net income or other comprehensive income.
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 Group purchases its own debt it is removed from the Consolidated Balance Sheets and the difference between the carrying amount of the liability and the consideration paid is recognized in the Consolidated Statements of Operations and Statements of Other Comprehensive Income.
Contingencies
The Group records loss contingencies if (a) information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the consolidated financial statements, and (b) the amount of loss can be reasonably estimated. If one or both criteria for accrual are not met, but there is at least a reasonable possibility that a loss will occur, the Group does not record an accrual for a loss contingency but describes the contingency and provides detail, when possible, of the estimated potential loss or range of loss. If an estimate cannot be made, a statement to that effect is made. Costs incurred with defending matters are expensed as incurred.
Margin lending, brokerage and other receivables
The Group engages in securities financing transactions with and for customers through margin lending. In margin lending, the Group's customers borrow funds from the Group or sell securities the customer does not own against the value of their qualifying securities held in custody by the Group. Under these agreements, the Group is permitted to sell or repledge securities received as collateral. Furthermore, the contractual arrangements establish that the Group can use the pledged collateral by the customers for repurchase agreement operations, securities lending transactions or delivery to other counterparties to cover short positions.
Margin lending, brokerage and other receivables comprise margin lending receivables, receivables from telecommunication services, brokerage commissions and other receivables related to the securities brokerage, banking and telecommunication
activity of the Group. At initial recognition, margin lending, brokerage and other receivables are recognized at fair value. Subsequently, margin lending, brokerage and other receivables are carried at cost net of any allowance for credit losses.
For both individual and institutional brokerage customers, the Group may enter into arrangements for securities financing transactions in respect of financial instruments held by the Group on behalf of the customer or may use such financial instruments for its own account or the account of another customer. The Group maintains omnibus brokerage accounts for certain institutional brokerage customers, in which transactions of the underlying customers of such institutional customers are combined in a single omnibus account with our third party broker. As noted above, the Group may use the assets within the omnibus accounts to finance, lend, provide credit or provide debt financing or otherwise use and direct the order or manner of assets for financing of other customers of ours.
Customers' required margin levels and established credit limits are monitored continuously by the Group's risk management staff. Pursuant to the Group's policy, customers are required to deposit additional collateral or reduce positions, when necessary, to avoid liquidation of their positions.
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 Group - put presumptively beyond the reach of the Group and its creditors, even in bankruptcy or other receivership.
•The transferee has rights to pledge or exchange financial assets.
•The Group 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 Group has not met the asset derecognition conditions above, it continues to recognize the asset to the extent of its continuing involvement.
Impairment of long-lived assets
In accordance with the accounting guidance for the impairment or disposal of long-lived assets, the Group 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. During the fiscal year ended March 31, 2026 and 2025 the Group did not record any charges for impairment of long-lived assets.
Impairment of goodwill
Goodwill is allocated to reporting units, which are identified as the operating segments or one level below operating segments that generate separate financial information regularly reviewed by management. The assignment of goodwill to reporting units allows for the assessment of potential impairment at the appropriate level within the organization.
The Group has identified its reporting units based on its organizational and operational structure, as well as the level at which internal financial information is reviewed by management to make strategic decisions. We have the following reporting units: Banking, Insurance, Brokerage and Other. A detailed description of these reporting units is provided in "Products and Services" in Item 1. Business.
Goodwill has been allocated to each reporting unit based on its relative fair value at the time of acquisition or significant triggering events. The fair value allocation of goodwill to reporting units is periodically reassessed to ensure alignment with the Group's evolving organizational structure and operational dynamics.
The Group conducts impairment testing on an annual basis or whenever indicators of potential impairment arise. The impairment testing involves comparing the carrying amount of each reporting unit, including its allocated goodwill, to its fair value. If the carrying amount exceeds the fair value, an impairment loss is recognized.
Further details regarding the measurement of goodwill impairment and the results of impairment tests for each reporting unit are provided below.
The Group discloses information about the reporting units, the carrying amounts of goodwill allocated to each reporting unit, and the impairment losses recognized. The allocation of goodwill to reporting units ensures a focused evaluation of each unit's financial performance and facilitates the identification of potential impairment, enhancing the transparency and reliability of the Company's financial reporting.
As of March 31, 2026 and 2025, goodwill recorded in the Group's Consolidated Balance Sheets totaled $51,099 and $49,093 respectively. The Group performs an impairment review at least annually unless indicators of impairment exist in interim periods. The entity compares the fair value of a reporting unit with its carrying amount. The goodwill impairment charge is recognized for the amount by which the reporting unit's carrying amount exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. If fair value exceeds the carrying amount, no impairment is recorded.
The goodwill value at March 31, 2026 increased compared to March 31, 2025, primarily as a result of the acquisition of 100% interest in Freedom Cloud Holding (formerly, Astel Group Ltd., renamed on January 8, 2026) by Freedom Telecom and the effect of foreign currency translation. Excluding the impact of acquisition of Freedom Cloud Holding, goodwill decreased due the sale of Comrun LLP.
The changes in the carrying amount of goodwill for the years ended March 31, 2026 and March 31, 2025, were as follows:
Business combinations and acquisitions
Acquisitions of businesses not under common control are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred. The assets and liabilities acquired are recognized, with certain exceptions such as deferred taxes, at their fair values at the acquisition date.
Business combinations under common control are accounted for under the pooling of interests method which involves combining the financial statements of the acquiring and acquired entities as if they had been combined from the beginning of the common control relationship. The assets and liabilities are combined on a carry over basis and not restated to its fair values. This approach required the Group to recast its consolidated financial statements to reflect the assets, liabilities and operations of the acquired entities since the beginning of the earliest comparative period.
Income taxes
The Group 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 Group is required to estimate its income taxes in each of the jurisdictions in which it operates. The Group 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. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to affect taxable income.
The Group records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Group determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Group recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
The Group will include interest and fines arising from the underpayment of income taxes in the provision for income taxes (if anticipated). As of March 31, 2026 and 2025, the Group had no accrued interest or fines related to uncertain tax positions.
The Global Intangible Low-Taxed Income ("GILTI") provisions of the Tax Cuts and Jobs Act require the Group 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 Group has presented the deferred tax impacts of GILTI tax in its consolidated financial statements as of March 31, 2026 and 2025.
Pillar 2
In October 2021, the Inclusive Framework, established by members of the OECD and the G20 countries, reached an agreement on a Two-Pillar Solution to address the tax challenges arising from the digitalisation of the economy (Pillar 1 and Pillar 2). The Inclusive Framework brings together over 140 countries and jurisdictions, including Kazakhstan.
Pillar 2 specifically targets MNEs with annual consolidated revenue of 750 million EUR or more (“MNE groups”) (for any two years within the last 4 reporting years), aiming to ensure a minimum global effective tax rate (ETR) of 15%.
The Pillar Two rules generally impose a 15% minimum effective tax rate, determined on a jurisdictional basis, through an income inclusion rule (“IIR”), an undertaxed profits rule (“UTPR”), and/or a qualified domestic minimum top-up tax (“QDMTT”), depending on the legislation enacted in each relevant jurisdiction. As of March 31, 2026, Pillar Two legislation has been enacted in certain jurisdictions in which the Group operates, including Germany, the United Kingdom,
Türkiye, Cyprus and the United Arab Emirates. The United Arab Emirates has implemented a domestic minimum top-up tax but has not implemented an IIR.
The OECD has issued transitional safe harbour rules intended to reduce initial compliance burdens for in-scope groups. Under the updated OECD guidance issued in January 2026, the transitional country-by-country reporting safe harbour is available for fiscal years beginning on or before December 31, 2027, but not for fiscal years ending after June 30, 2029, subject to meeting the applicable requirements. Based on the Group’s assessment of the fiscal year ended March 31, 2026, the Group expects that certain jurisdictions may qualify for one or more of the transitional safe harbour tests. However, Kazakhstan and Cyprus did not qualify for the transitional safe harbour based on the Group’s preliminary assessment.
On January 5, 2026, the OECD released the Side-by-Side package, which includes a Side-by-Side Safe Harbour for multinational enterprise groups whose ultimate parent entity is located in a jurisdiction with a Qualified Side-by-Side Regime. The OECD Central Record lists the United States as a jurisdiction with a Qualified Side-by-Side Regime for fiscal years commencing on or after January 1, 2026. Because the Group’s Ultimate Parent Entity is located in the United States, which is listed by the OECD as a jurisdiction with an Eligible Side-by-Side Regime, the Group is eligible to elect the Side-by-Side Safe Harbour for fiscal years commencing on or after January 1, 2026. Accordingly, the Group expects to apply this safe harbour beginning with its fiscal year commencing April 1, 2026, subject to the applicable election and reporting requirements. Where validly elected, the Side-by-Side Safe Harbour generally deems top-up tax to be zero for purposes of the IIR and UTPR. The safe harbour does not apply to QDMTTs and does not affect fiscal years commencing before January 1, 2026.
In this regard, Side-by-Side Safe Harbour does not apply to QDMTTs and does not affect the Group’s fiscal year ended March 31, 2026. The Group will continue to evaluate the impact of Pillar Two for future periods, including any exposure under QDMTT rules and applicable filing and reporting obligations.
Transitional Safe Harbor Rules
To reduce initial compliance burdens, the OECD introduced Transitional Safe Harbor Rules (Annex A to the Administrative Guidance, Dec 2022), applicable for fiscal years beginning on or before December 31, 2026 (but not after June 30, 2028). A jurisdictional safe harbor is met if one of the following tests is satisfied:
•De Minimis Test – Jurisdictional revenue < EUR 10 million and Profit (Loss) Before Tax < EUR 1 million
•Simplified ETR Test – Simplified covered taxes ÷ PBT > 15%
•Routine Profits Test – PBT ≤ routine profits based on the Substance-Based Income Exclusion (SBIE) formula
Based on FY 2026 results, assessments indicate that all jurisdictions except Kazakhstan and Cyprus qualify for at least one of the safe harbor tests.
Side-by-Side Administrative Guidance
On January 5, 2026, the OECD released the Side-by-Side package, which provides relief from the Pillar Two IIR and UTPR for multinational groups whose ultimate parent entity is located in a jurisdiction with a Qualified Side-by-Side regime, for fiscal years beginning on or after January 1, 2026. OECD materials issued in January 2026 indicate that the United States is treated as an Eligible Side-by-Side regime jurisdiction. Given that Group’s ultimate parent entity is located in the United States, the Group may access this relief for those fiscal years i.e. top-up tax should not arise under the IIR or UTPR for the constituent entities for fiscal years covered by the election. This relief does not apply to QDMTTs and does not affect fiscal years beginning before January 1, 2026.
Consistent with this, although Kazakhstan had not yet enacted Pillar Two legislation and Uzbekistan, Azerbaijan and Armenia had not yet made a public enactment announcement, low-taxed entities in those jurisdictions should not create IIR or UTPR exposure for the Group in other jurisdictions for fiscal years in which the Group qualifies for and elects the Side-by-Side Safe Harbour. Accordingly, low-taxed income in Kazakhstan should not be reallocated under UTPR to jurisdictions such as Cyprus, Germany, the United Kingdom or Türkiye for those fiscal years. Any potential exposure to QDMTTs would remain unaffected.
Fair Value
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 Group 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 Group follows ASU No. 2016-02, "Leases (Topic 842)," upon adoption of ASC 842, the Group elected not to recognize leases with terms of one-year or less on the balance sheet.
Operating lease assets and corresponding lease liabilities were recognized on the Company's Consolidated Balance Sheets. Refer to Note 27 "Leases", to the 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 and sixty-five years.
Insurance contract assets and liabilities
The Group's insurance operations, conducted through Freedom Finance Life JSC ("Freedom Life") and Freedom Finance Insurance JSC ("Freedom Insurance"), write both long-duration and short-duration insurance contracts as defined in ASC 944. Effective for annual periods beginning April 1, 2025, the Group adopted ASU 2018-12 (LDTI) using the modified retrospective transition method with a transition date of April 1, 2023, which affected the measurement and presentation of long-duration contracts.
Insurance and reinsurance receivable
Insurance receivable is recognized when the contract comes into force and measured on initial recognition at the fair value of the consideration receivable. Reinsurance receivable is recognized when a gross payment is accrued for which there is reinsurance coverage. Subsequent to initial recognition, any insurance and reinsurance receivable is measured at cost net of any allowance for impairment losses.
Deferred acquisition costs
Deferred acquisition costs (DAC) are commissions, premium taxes, and other incremental direct costs of contract acquisition that results directly from and are essential to the contract transaction(s) and would not have been incurred by the Group had the contract transaction(s) not occurred. The deferred amounts are recorded as an asset within Insurance contract assets on the balance sheet and amortized to expense in a systematic manner.
For long-duration contracts, effective with the adoption of LDTI, DAC is amortized on a constant-level basis over the expected contract term, grouped by issue-year cohort, in accordance with ASC 944-30-35-3A as amended by LDTI. DAC on long-duration contracts is not subject to impairment testing or loss-recognition assessment under LDTI. For short-duration contracts DAC continues to be amortized over the effective period of the related insurance policies.
DAC amortization for both long-duration and short-duration contracts is recognized within Fee and commission expense.
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.
The Group enters into reinsurance arrangements in the ordinary course of its insurance operations; however, reinsurance activity was not significant to the Group’s consolidated financial statements for the periods presented. Reinsurance does not relieve the Group of its primary obligation to policyholders. Amounts recoverable from reinsurers are recognized as reinsurance receivables or reinsurance assets, as applicable, and are evaluated for collectability.
Ceded reinsurance does not relieve the Group of its primary obligation to policyholders, and the Group remains liable to policyholders to the extent that any reinsurer fails to meet its obligations under the related reinsurance agreements. As of March 31, 2026 the Group did not have a significant concentration of credit risk with any individual reinsurer or group of reinsurers related to reinsurance recoverables, prepaid reinsurance premiums or reinsurers’ share of insurance reserves.
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 when contract come into force 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 Consolidated Balance Sheets.
Unearned premium reserve relates to non-life insurance products and non-annuity insurance products.
Claims and other insurance expenses are expensed to the Consolidated Statements of Operations and Statements of Other Comprehensive Income as incurred.
Insurance loss reserves
Non-life and general 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 Group during its investigation of insured events. IBNR is estimated by the Group based on its previous history of reported/settled claims using actuarial methods of calculation, which include claim development triangles.
Reinsurance assets in IBNR are estimated applying the same actuarial method used in IBNR estimation.
The Group evaluates whether a premium deficiency exists for its short-duration contracts by comparing expected future claims and maintenance costs to expected future premiums under existing contracts. If anticipated losses exceed future premiums, a premium deficiency loss is recognized immediately within Insurance claims and policyholder benefits, net of reinsurance.
For short-duration contracts written by FF Insurance, the Group considers anticipated investment income in performing premium deficiency testing. Anticipated investment income is based on expected yields on the invested assets supporting
the related insurance liabilities over the expected claim payment and maintenance cost period. For short-duration and long-duration contracts written by FF Life, the Group does not consider anticipated investment income in performing premium deficiency testing. If anticipated losses exceed future premiums, after considering anticipated investment income where applicable, a premium deficiency loss is recognized immediately within Insurance claims and policyholder benefits, net of reinsurance. Management assessed the effect of the differing methodologies and concluded that the impact is not material to the consolidated financial statements.
Liability for future policy benefits — long-duration contracts
The Group establishes a liability for future policy benefits (LFPB) for its long-duration life insurance and annuity contracts. The LFPB is measured as the present value of expected future policy benefits and related policy maintenance expenses less the present value of expected future net premiums, using the net premium ratio approach prescribed by ASC 944-40 as amended by LDTI. The LFPB is included within Insurance contract liabilities on the consolidated balance sheet.
Cash flow assumptions
The significant cash flow assumptions used to measure the LFPB are mortality, lapse rates, and policy maintenance expenses. Mortality assumptions are based on local mortality tables established by the regulatory framework of the Republic of Kazakhstan for retirement annuity products and employer liability annuities, and on the reinsurer's mortality tables for other portfolios. Lapse rates are determined based on the Group's historical experience, analyzed by portfolio and policy duration. Policy maintenance expenses reflect the current level of per-policy costs, adjusted for the expected rate of inflation. Cash flow assumptions are reviewed and, if a change is warranted, updated at least annually. The effect of changes in cash flow assumptions is recognized within Insurance claims and policyholder benefits, net of reinsurance, in net income in the period of the change. The effect of differences between actual experience and expected experience (experience adjustments) is also recognized within the same line item in the period in which the differences arise.
Discount rate
The LFPB is measured using a discount rate equivalent to the yield of upper-medium grade (low-credit-risk) fixed-income instruments, reflecting the duration characteristics and currency of the liability. For tenge-denominated long-duration contracts, the Group derives the discount curve from the Kazakhstan sovereign yield curve, fitted using the Nelson-Siegel parametric model with parameters published by the Kazakhstan Stock Exchange (KASE). For U.S. dollar-denominated long-duration contracts, the Group uses the U.S. Treasury High Quality Market (HQM) yield curve published by the Board of Governors of the Federal Reserve System. The discount rate is updated quarterly. The interest accrual on the LFPB, recorded within Insurance claims and policyholder benefits, net of reinsurance, uses a locked-in discount rate, which is the upper-medium grade rate at the date of contract issuance (or the transition date, April 1, 2023, for contracts in force at that date). The difference between the LFPB measured at the current discount rate and the LFPB measured at the locked-in rate is recognized in other comprehensive income within Change in discount rate on liability for future policy benefits, net of tax.
Net premium ratio
The net premium ratio is calculated at contract issue (or at the transition date for in-force contracts) and is capped at 100%. The ratio is updated when cash flow assumptions are changed or when actual experience differs from expected experience. If the net premium ratio would exceed 100% as a result of such update, the ratio is capped at 100% and the excess is recognized as an immediate loss within Insurance claims and policyholder benefits, net of reinsurance.
Deferred profit liability
For limited-payment long-duration insurance contracts, the Group records a deferred profit liability (DPL) when gross premiums received or due exceed the net premiums required to provide for expected future policy benefits and related expenses. Because the collection of premiums under limited-payment contracts does not represent the completion of the earnings process, the excess of gross premiums over net premiums is deferred and included within Insurance contract liabilities on the consolidated balance sheet. The deferred profit liability is measured using assumptions that are consistent with those used in measuring the related liability for future policy benefits, including mortality, lapse rates, and policy maintenance expenses. The deferred profit liability is subsequently recognized in net insurance revenue over the expected life of the related contracts in a constant relationship with the discounted amount of insurance in force for life insurance
contracts or the discounted amount of expected future benefit payments for annuity contracts. Interest accretes to the unamortized deferred profit liability using the original discount rate determined at contract issuance, or the transition date for contracts in force at the transition date, as applicable, and is recognized within net insurance revenue.
The Group reviews and updates cash flow assumptions used to measure the deferred profit liability contemporaneously with the review of assumptions used to measure the related liability for future policy benefits. Changes in the deferred profit liability resulting from assumption updates or differences between actual experience and expected experience are recognized in current-period earnings within net insurance revenue as a deferred profit liability remeasurement gain or loss. Amounts released from the deferred profit liability are recognized within net insurance revenue as deferred profit liability amortization or release.
Policyholder Dividends
The Company may, at its sole discretion, declare and pay dividends to certain pension policyholders. Such dividends are not contractually guaranteed and are not legally or constructively obligated prior to declaration by the Company.
Because the payment of these dividends is subject to the Company's discretionary approval and does not represent a present obligation as of the reporting date, no liability is recognized within future policy benefit reserves, deferred profit liabilities, or other policyholder benefit liabilities. These costs are expensed as incurred.
Segment information
From the beginning of calendar 2024, our Chief Executive Officer, Chief Financial Officer and President, who collectively act as our chief operating decision maker (CODM), began to manage our business, make operating decisions, and evaluate operating performance on the basis of a new segmental structure. As a result, we have realigned our reportable segments into the following four segments: Brokerage, Banking, Insurance, and Other. All prior period segment information has been recast to reflect this change in reportable segments.
The Company used the management approach to identify its reportable segments, as required by ASC 280. The management approach is based on the way the Company's management organizes and evaluates its operations, and based on the way the Company's operations are managed and reported in its internal financial reporting system.
The Company evaluated whether its segments met the quantitative thresholds to be reportable separately. The quantitative thresholds require that a segment's revenue is 10% or more of the combined revenue of all segments, or its absolute profit or loss is 10% or more of the greater of the combined absolute profit of all segments that have a positive profit or the combined absolute loss of all segments that have a loss. The Brokerage, Banking and Insurance segments were identified under the quantitative thresholds.
Under the management approach, the Company identified the Brokerage, Banking, Insurance and Other segments as its reportable segments as they are managed separately. The performance of all segments is regularly reviewed by the CODM.
Factors Used in Determining Reportable Segments
The Company considered several factors when determining its reportable segments. These factors include similarities and differences among its products, services, economic factors, and internal reporting.
The Company considered the similarities and differences among its business to determine whether they should be aggregated or reported separately. Each business was determined to be sufficiently different from other businesses and therefore should be reported separately.
The Company also considered the economic factors that affect its operating segments, such as the regulatory environment, competitive landscape, and market conditions, to determine whether they should be reported separately. Reportable regions were determined to have unique economic factors that warranted separate reporting.
The information that is regularly reviewed by the CODM, including but not limited to the revenue, profit or loss, and assets, was also considered by the Company when determining its reportable segments. Each reportable segment was determined to be regularly reviewed by the CODM and therefore should be reported separately. All prior period segment information has been recast to reflect this change in reportable segments.
Recent accounting pronouncements
Adoption of ASU 2018-12 — Targeted Improvements to the Accounting for Long-Duration Contracts
Effective for annual periods beginning April 1, 2025, the Company adopted ASU 2018-12, Financial Services — Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, as clarified and amended by ASU 2019-09 and ASU 2020-11 (collectively, "LDTI"), using the modified retrospective transition method with a transition date of April 1, 2023.
LDTI changed existing recognition, measurement, presentation, and disclosure requirements for long-duration insurance contracts. The principal changes affecting the Company are: (1) a requirement to review and, if there is a change, update cash flow assumptions used to measure the liability for future policy benefits (LFPB) at least annually and to update the discount rate assumption quarterly, with assumption changes recognized within Insurance claims and policyholder benefits, net of reinsurance and discount rate changes recognized within Change in discount rate on liability for future policy benefits, net of tax in other comprehensive income; (2) simplified amortization for deferred acquisition costs (DAC) on a constant-level basis over the expected contract term, replacing the previous coverage-period approach; and (3) enhanced financial statement presentation and disclosures, including disaggregated rollforwards of the LFPB and DAC.
The Company applied the modified retrospective transition approach to all long-duration contracts in force as of the transition date. Under this approach, the carrying amount of the LFPB at April 1, 2023 was adjusted to remove any related amounts in accumulated other comprehensive income (AOCI), and the LFPB was remeasured using the current upper-medium grade discount rate as of the transition date. DAC balances at the transition date were not adjusted; however, subsequent amortization follows the new straight-line method. Prior comparative periods (fiscal years 2024 and 2025) have been recast to reflect the adoption of LDTI. The quantitative effects of adoption on the consolidated financial statements are disclosed in Note 3.
In connection with the adoption of LDTI, the Company renamed the following line items in its consolidated financial statements to accommodate the broader scope of LDTI-related activity: "Insurance underwriting income" was renamed to "Net insurance revenue"; "Insurance claims incurred, net of reinsurance" was renamed to "Insurance claims and policyholder benefits, net of reinsurance". A new line "Change in discount rate on liability for future policy benefits, net of tax" was added to the statement of other comprehensive income. Prior-period amounts have been conformed to the current-period presentation. These are changes in presentation only and have no effect on previously reported total revenue, total expense, net income, total assets, or total liabilities.
Adoption of ASU 2023-09 — Income Taxes: Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which would require additional transparency for income tax disclosures, including the income tax rate reconciliation table and cash taxes paid both in the United States and foreign jurisdictions. This standard is effective for annual periods beginning after December 15, 2024. The Company adopted ASU No 2023-09 effective April 1, 2025.
Recent accounting pronouncements not yet adopted
In October 2023, the FASB issued Accounting Standards Update No. 2023-06 ("ASU 2023-06"), Disclosure Improvements - Codification Amendment in Response to the SEC's Disclosure Update and Simplification Initiative. ASU 2023-06 modified the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC's regulations. The amendments to the various topics should be applied prospectively, and the effective date will be determined for each individual disclosure based on the effective date of the SEC's removal of the related disclosure. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, then ASU 2023-06 will not become effective. Early adoption is prohibited. While the Company is currently evaluating the effect that implementation of this update will have on its consolidated financial statements, no material impact is anticipated.
In November 2024, the FASB issued ASU No. 2024-03, "Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures" (Subtopic 220-40). The amendments in this Update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this Update should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this Update or (2) retrospectively to any or all
prior periods presented in the financial statements. The Company is currently evaluating the impact that ASU No 2024-03 will have on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU No. 2024-04, "Debt-Debt with Conversion and Other Options" (Subtopic 470-20). The amendments in this Update clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. The amendments in this Update permit an entity to apply the new guidance on either a prospective or a retrospective basis. The Company is currently evaluating the impact that ASU No 2024-04 will have on its consolidated financial statements and related disclosures.
In May 2025, the FASB issued ASU No. 2025-03, “Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity”. The amendments in this update affect entities involved in acquisition transactions effected primarily by exchanging equity interest when the legal acquiree is a VIE that meets the definition of a business. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The amendments in this update require that an entity apply the new guidance prospectively to any acquisition transaction that occurs after the initial application date. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact that ASU No 2025-03 will have on its consolidated financial statements and related disclosures.
In May 2025, the FASB issued ASU No. 2025-04, “Compensation-Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer”. The amendments in this update affect all entities that issue share-based consideration to a customer that is within the scope of Topic 606. The amendments in this update are effective for all entities for annual reporting periods (including interim reporting periods within annual reporting periods) beginning after December 15, 2026. Early adoption is permitted for all entities. The amendments in this update permit a grantor to apply the new guidance on either a modified retrospective or a retrospective basis. The Company is currently evaluating the impact that ASU No 2025-04 will have on its consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU No. 2025-05, “Financial instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets”. The amendments in this update provide (1) all entities with a practical expedient and (2) entities other than public business entities with an accounting policy election when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. An entity that elects the practical expedient and the accounting policy election, if applicable, should apply the amendments in this update prospectively. The amendments will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the impact that ASU No 2025-05 will have on its consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU No. 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software”. The amendments in this update apply to all entities subject to the internal-use software guidance in Subtopic 350-40. The amendments also apply to all entities that account for website development costs in accordance with Subtopic 350-50, Intangibles—Goodwill and Other—Website Development Costs. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The amendments in this update permit an entity to apply the new guidance using any of the following transition approaches: a prospective transition approach, a modified transition approach that is based on the status of the project and whether software costs were capitalized before the date of adoption, A retrospective transition approach. The Company is currently evaluating the impact that ASU No 2025-06 will have on its consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU No. 2025-07, “Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract”. The Board is issuing this update to address stakeholders’ concerns about the application of derivative accounting to contracts with features based on the operations or activities of one of the parties to the contract and the diversity in accounting for share-based noncash consideration from a customer that is
consideration for the transfer of goods or services. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact that ASU No 2025-07 will have on its consolidated financial statements and related disclosures.
In November 2025, the FASB issued ASU No. 2025-08, Financial instruments – Credit losses (Topic 326): Purchased loans. The amendments in this update expand the population of acquired financial assets subject to the gross-up approach in Topic 326. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. If an entity adopts the amendments in an interim reporting period, it should apply the amendments as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period.
The Company early adopted ASU 2025-08, applying amendments as of October 1, 2025. The Company adopted the guidance on a prospective basis to loans that are acquired on or after the initial application date, in accordance with the transition provisions of ASU 2025-08. Accordingly, the guidance applies to transactions occurring on or after the adoption date, the prior-period financial statements were not restated. The adoption of this ASU did not materially affect on the Company’s consolidated financial statements.
In November 2025, the FASB issued ASU No. 2025-09, “Derivatives and hedging (Topic 815): Hedge accounting improvements”. The amendments in this update apply to any entity that elects to apply hedge accounting in accordance with Topic 815. For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods. For entities other than public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted on any date on or after the issuance of this update. The Company is currently evaluating the impact that ASU No 2025-09 will have on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-10, “Government grants (Topic 832): Accounting for government grants received by business entities”. The amendments in this update apply to business entities (specifically, all entities except for not-for-profit entities and employee benefit plans) that receive a government grant. For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. For entities other than public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2029, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact that ASU No 2025-10 will have on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The Board is issuing amendments in this update to improve the guidance in Topic 270, Interim Reporting, by improving the navigability of the required interim disclosures and clarifying when that guidance is applicable. The amendments also provide additional guidance on what disclosures should be provided in interim reporting periods. The amendments add to Topic 270 a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments in this update are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, for public business entities and for interim reporting periods within annual reporting periods beginning after December 15, 2028, for entities other than public business entities. Early adoption is permitted for all entities. The Company is currently evaluating the impact that ASU No 2025-11 will have on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-12, Codification improvements. Thirty-three issues are addressed in this update. The amendments in this update represent changes to the Codification that clarify, correct errors, or make minor improvements. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact that ASU No 2025-12 will have on its consolidated financial statements and related disclosures.
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