LRC formula under PAA
Under a CIA.IFRS17-LRC battlecard, it says that the LRC formula using PAA is the following:
While in a CIA.IFRS17 battlecard, it says the following:
I wonder:
1. How do we reconcile both formulas?
2. In which scenario should we use which formula?
Comments
Dang thought I caught them all. You should always use formula 1. Previously, we had LRC = UEP - Prems Receivable - DAC in the wiki which was not correct and I have been going around replacing them, but looks like one fell through the cracks. It should just be UEP - DAC which reconciles to formula 1.
UEP = Premiums Received - Insurance revenue
DAC = -insurance acquisition cash flows + amortization of insurance acquisition cash flows
You can ignore financing and investment component for the exam. Doubt it will be tested.
Hi! I was confused with the quiz of IFRS-1, where it stated that PAA LRC = prm receivable - ins acq CF
After seeing this discussion, I feel like it is from the previous version of the material? And it should be LRC = UEP - DAC
It is the same formula. This is PAA LRC at time 0 where UEP = Premiums received since no premium has been earned yet and premiums receivable = 0.