Question on the differences between IFRS 17 and CIA

Tony88passTony88pass
edited October 2021 in CIA.IFRS17

Hi Graham,

Just wanted to ask a few clarifying questions on the 2nd and 3rd comparison between the two standards:

DAC Deferral:
IFRS 17: entity may choose deferral or direct expense for short term contracts
Question: Is it saying that IFRS 17 can choose either defer or just recognize the whole expense for short term contract?
CIA: No deferral in explicit valuation, but deferral if (UEP-DAC) is held
Question: didn't really get what it meant here

DAC amount:
IFRS 17: allow deferral of DAC that is directly attributable to the portfolio of the contracts
CIA: allowable deferral is different
Question: Is it saying CIA defer the expense on a higher level basis?

Thanks,
Tony

Comments

  • grahamgraham

    Before I try to answer that, take a look at this old exam problem (from a totally different reading) about the differences between IRFS17 and current CIA methods. It's much easier to understand than what's given in this IFRS17 reading.

    Anyway, I'm not sure I can give you much more information here. The discussion in the source text is abstract so it's hard to see the impact on the numbers when switching to IFRS17. I think you just have to take what they say at face value.

    DAC Deferral:

    • It seems that in IFRS17, you can either defer acquisition costs or expense them immediately. I'm not totally sure what they mean by "(UEP-DAC) is held", but this quantity is essentially equal to the premium liabilities (assuming no unearned commission). You can see this from the formula in the CIA.PrLiabs reading. So I suppose they mean you can defer acquisition costs if you are holding non-zero premium liabilities. (In other words, if you have enough UEP leftover, you can defer acquisition costs.)

    DAC amount:

    • The source text doesn't specify whether the amount is higher or lower than in IFRS17. It just says it's different.

    Sorry, not a great answer. It's simply not explained any further in the reading.

  • Tony88passTony88pass

    Hi Graham,

    So under DAC deferral, seems my understanding is correct for IFRS 17?

  • grahamgraham

    Yes, that's a direct quote from the source text.

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