Excel sample questions #7

user1user1
in CIA.IFRS17-LRC

I am unclear as to why the insurance finance expense is added into the LRC. I thought the insurance finance expense is used to calculate the insurance revenue financing component only.

Also in the formula for subsequent measure for LRC under PAA, where is the insurance finance expense added ?

At subsequent measurement, the PAA can be broken down as:

  • The carrying amount of the liability at the start of the reporting period
  • Premiums received in the period
  • Amortization of insurance acquisition cash flows, unless the entity chooses to recognize it as an expense
  • Adjustment to the financing component
  • Insurance acquisition cash flows, unless the entity choose to recognize it as an expense
  • Amount recognized as insurance revenue in period (Earned premium in period)
  • Investment component paid to LIC

Comments

  • Staff-T1Staff-T1

    You should read section 5.6.1 in the LRC paper to give you some clarification on your question. It explains this whole concept pretty well.

    IFE is the 'adjustment to financing component'

  • Staff-T1Staff-T1

    Did you read section 5.6.1 as I mentioned above? Basically the financing component affects the price of the policy and it should be reflected as such

    • Yeap
    • Yeap
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