LRC at initial recognition
Hi Graham,
In this example the LRC at initial recognition is 1800-600= 1200, right?
Thank you
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Hi Graham,
In this example the LRC at initial recognition is 1800-600= 1200, right?
Thank you
Comments
Yup
That's a good question @jjj820. I added that calculation to the Excel problems at the end of this section:
how would we calculate the FCF at time 0-3 if it were to be GMA question?
You would do the PV outflow - PV inflow
this is my attempt but it looks very off..
You can't do it in this way - This is information specifically for PAA
Then theoretically if we were to calculate FCF, should we include directly attributable acquisition and maintenance expenses?
Yup although I believe you do not amortize your DAC under GMA
what do you mean by not amortizing DAC under GMA?
I believe it enters the PV(CF) calculation in FCF, but the GMA v PAA summary says that you cannot recognize them upfront in GMA:
https://www.battleactsmain.ca/pdf/CIA.IFRS17-LRC_compare_GMA_PAA.pdf
@graham any thoughts?
Whoops I missed this - Yes you are right. I checked my calculation files and we do amortize DAC under GMM
Is DAC the directly attributable maintenance expenses that are incurred in 1 year in this example? also is DAC always the deferred acquisition costs that are directly attributable to the portfolio or can they also include non-directly attributable
Yes, that is correct. Non-directly attributable costs fall under the other expenses category and are not part of the LRC.
As per section 5.5: "Only costs that are directly attributable to the portfolio of insurance contracts to which the group belongs are included in the measurement of the liability. Other costs that do not meet this requirement will be accounted for outside of insurance service results on the financial statements as “other expenses.”