carrying amount for LRC using PAA (calculated at initial recognition)
The formula is
premiums received (at initial recognition)
- acquisition cash flows at that date (unless already expensed)
- any assets for acquisition cash flows derecognized - liabilities previously recognized
Can I confirm that last two items are derecognized items in IFRS17-LRC?
In IFRS17 - LRC, there are 3 derecognized items:
any asset for insurance acquisition cash flows
any other asset or liability previously recognized for cash flows related to the group of contracts
The formula has mentioned asset for insurance acquisition cash flows and liabilities previously recognized. But are we missing the assets previously recognized from the formula?
Comments
Hi,
So let's check what the source material says:
On initial recognition, the carrying amount of the liability is:
(i) the premiums, if any, received at initial recognition
(ii) minus any insurance acquisition cash flows at that date
(iii) plus or minus any amount arising from the derecognition at that date of:
1. any asset for insurance acquisition cash flows
2. any other asset or liability previously recognized for cash flows related to
the group of contracts
Yes, I do not see any inconsistencies between IFRS17-LRC and IFRS17-PAA
Specifically pointing to number 2 above, I do believe the formula above needs the assets previously recognized.
Trying to understand the Formula.
Let's say we have commissions = $100 (and we recognize $20 as an expense immediately and defer the rest of the amount) and Premium = $200.
Under PAA, LRC (at initial recognition) = 200 - 80 = 120.
What are examples of acquisition cash flows derecognized and liabilities previously recognized?
Yup that is correct.
As for examples, I have no idea - It's not stated in the paper and I have not seen this in work yet