Fall 2019 Q 27 b)

adipelinoadipelino
in General

Where is this information coming from on the differences in discounting between Canadian ASOP and IFRS17?
I thought the answer would be the same as what's in the battle cards for the CIA Valn wiki (ex: using a discount curve and implicit adjustment for financial risk instead of PfAD), but the examiner report explicitly says the discount curve portion is incorrect and instead says:

Sample 1
 If IFRS 17, do not have to discount LRC if coverage period < 1 year or for longer coverage periods where the effect of discounting is not significant. Canadian ASOP requires taking into account the time value of money
 For IFRS 17, If PAA is used for LRC, no need to account / adjust for time value of money and other financial risks for LIC liabilities if LIC cash flows are expected to be paid / received within 1 year from date claims are incurred. For CSOP, need to account for it.
Sample 2
 IFRS 17 does not depend on the assets that support the liability and also the assumptions on reinvestment while current practice does
 IFRS 17 discount rate is to reflect the characteristic of the liability (timing, currency) while the current practice does not look into these characteristics

Comments

  • Staff-T1Staff-T1

    @graham any thoughts on this?

  • grahamgraham
    edited October 2022

    That question was from 2019 and the reading CIA.Valn has different content. In particular, there was a whole section discussing IFRS 17 and the differences versus what was current CIA practice at the time. The answer to that exam question was a bullet point list that you just had to memorize and it may not have even been correct.

    In any case, that section was removed from the CIA.Valn source text because there are are now several other readings specifically on IFRS 17. Also, most of the material on the old CIA methods was removed from the syllabus so if they ask a question like that, your answer should come from current readings.

    I will mark it that exam question as being outdated since you couldn't quite get the answer they provide from the current readings.

    P.S. I just checked and the BattleCard corresponding to that exam question is already marked as outdated. I did however add footnote for that to the "Exam Summaries" wiki page.

  • adipelinoadipelino

    thank you!

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