LRC formula under PAA

ShimiReenShimiReen
in CIA.IFRS17

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

  • Staff-T1Staff-T1

    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.

  • arianeguayarianeguay

    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

  • Staff-T1Staff-T1

    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.

  • rlessardrlessard

    Is this normal that in the source text (p.12), it is clearly written that:
    LRC = Premium received - DAC, where Premium received = UEP - Prem receivable ?

    We can consider that there is a typo in the source text ?

  • Staff-T1Staff-T1

    I don't see anything on page 12 related to that. Section 5.1 and 5.2 is what OP is referring to

  • rlessardrlessard


    Here is what I am talking about in p.12 of the source text.

  • Staff-T1Staff-T1

    I would just stick to the first formula posted by OP above

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