Q22

oxalis0217oxalis0217
edited March 17 in CAS Sample IFRS 17 Questions

Hi,

Can you please help to clarify the following questions:

  1. What's included in the Attributable cost: Maintenance costs, acquisition cost and other cost, and for each cost we further distinguish directly attributable & non directly attributable cost, is this true?
  2. Is only directly attributable cost included in the insurance liability calculation?
  3. I'm confused with the 2 statements about LRC, in your sample IFRS17 Q22 comment, you have LRC is alaways 0 at initial recognition, at the same time, in this illustration: https://battleactsmain.ca/wiki6c/File:CIA.IFRS17-LRC_(020)_FCF_diagram.png, we have LRC is non-zero, and it's the sum of CSM + FCF, can you clarify?
  4. In question 22, in the BattleAct comment row 96, you suggest to remove the directly attributable acquisition expenses because they are paid at inception. In the given information, it states that the acquisition expenses are deferred and amortized over 2-years. As they are deferred, should we consider them as future cash flow and keep them in the FCF?
  5. In this attachment, is this formula always true (i.e. at initial recognition and also at subsequent adjustment)?, can you further confirm that at subsequent recognition, we usually remove the last term pv(premium receivable) since most of the times, premiums are received in full at inception?
  6. Is it typo that directly attributable maintenance expense of $70 is incurred in 2023 instead of 2024 in cell E9?
  7. for PAA LRC the formula = UEP - DAC, this is true all the time or only at initial recognition, or under specific conditions?

Thank you!!!

Comments

  • Staff-T1Staff-T1
    1. Generally true
    2. Yes
    3. That diagram is immediately after the first premium has been received, so just after time 0.
    4. In row 96, I am working on the logic used by the question creator in reaching the answer, not that I necessarily agree with it. For calculating FCF, it does not matter whether they are amortized or not, only the timing of when they are paid out.
    5. Yes
    6. No, it is not a typo. Maintenance expenses by definition are used to maintain the policy so they wouldn't all be paid on inception
    7. Always true
  • oxalis0217oxalis0217

    Is " initial recognition" and "at inception" the same thing?
    How do we know if at inception we assume premiums are already received or not, do we just put down our assumptions explicitly during the exam?

  • Staff-T1Staff-T1

    Initial recognition and inception are the same thing.
    In an exam question if calculating FCF they will let you know how much premiums are outstanding. You will know if the premium has already been received

  • lewisjunlewisjun

    for part a) if LRC is supposed to be 2500-250=2250, what would the CSM be?

  • Staff-T1Staff-T1

    Just reduce the CSM by 250 so you'll get 142.5

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