LC calculation under PAA

dogechowdogechow
edited March 2022 in CIA.IFRS17-LRC

In Section 7, steps are given to calculate LC under PAA. To me this resembles the calculation for FCF (cash inflows - cash outflows - discounting - RA), but wouldn't you then need to subtract LRC ex. LC in order to get the LC? (based on the formula for the quantitative assessment)

i.e. FCF = (LRC ex. LC) + LC

Comments

  • Staff-T1Staff-T1

    Yes you are right. You would need to subtract the LRC ex LC which is (UEP - DAC). I will inform Graham

  • grahamgraham

    I've corrected this. Thanks! Link below...

  • wilsonchan18wilsonchan18

    Sorry, just to confirm here. I can understand that (2) to (4) are all Cash Outflow, can I confirm that the (2) to (4) will be minus from (1) [i.e. Cash Inflow], so that this arrive exactly like the FCF in GMA of PV (All CFs) + RA.

    Then it should give a LC if the FCF is below the LRC.
    Am I following this correctly?

    Thanks and Warm Regards,
    Wilson

  • Staff-T1Staff-T1

    Well discounting (3) reduces your liability so it would be the opposite sign of (2).
    You are defining your FCF as > 0 if the contract is profitable.
    Thus, It will give you a LC if your FCF is below your LRC excluding Loss component

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