Spring 2019 Q20

slocksonslockson
in CIA.Subseq

I'm not sure I agree with the Examiner's report for this question. We are given that:

When doing this question, I was following the Subsequent event decision tree (which does not mention materiality), and based on that, the Calculation error would be an adjusting event. I'm not sure why this was deemed to be incorrect.

Comments

  • grahamgraham

    Strictly speaking you are correct. The event decision tree doesn't include considerations related to materiality and this is an oversight on the part of the authours. In the paragraph above the event decision tree in Section 4 of the source reading, the last sentence states:

    • As noted previously, when working with the event decision tree, it is critical that the actuary keep in mind the concept of materiality.

    This means that if the event is not material, you shouldn't even need the decision tree. See also the relevant section in the wiki:

    Here, I recommend disclosure in the notes to the financial statements even if the event is not material. Whether it is ultimately disclosed or not depends on the situation but on the exam, I might just say something like:

    • Although the event is not material, a brief explanation can be included in the notes to the financial statements to ensure the reader is aware that this item has been considered by the actuary.
Sign In or Register to comment.