Transition to IFRS17

bicbicbicbic
in CIA.IFRS17-IC

Can you explain more on under which circumstances each of the approaches should be used?

For full retrospective approach and modified approach, is the difference being full retrospective approach can only use the information at initial recognition while the modified approach can use information at transition?

Can you explain more on the differences between modified approach and fair value approach?

Thanks,

Comments

  • Staff-T1Staff-T1

    I've explained it maybe at a higher level here: https://www.battleactsmain.ca/vanillaforum/discussion/905/transition-to-ifrs17#latest

    For full retro approach, you have to do everything as if IFRS 17 was always in effect. This means identifying groups as at the date of initial recognition (i.e. you would have to assess for example your AY 2018 lines whether they would have been onerous, no change of being onerous or other at 2018. If profitable/onerous, then you'd have to amortise your CSM or LC over time to arrive at the current CSM/LC for those groups)

    Modified approach is similar to what you have in full retrospective approach except you use information available at transition

    Long-winded way of saying your initial explanation is correct :)

    For fair-value I believe the difference is that you can group policies more than one year apart

    Example:
    Let's say you have Automobile Ontario as a portfolio -
    Under the Modified retro, you'd have groups for 2018, 2019, 2020, etc
    Under the Fair Value approach, you'd just have 3 groups: other, onerous, no chance of being onerous

  • bicbicbicbic

    Thanks for the explanation!
    For the FV approach vs Modified approach, the second bullet point of modified approach states that "Groups can include contracts issued more than one year apart." That's where i get confused. Seems that both can have contracts more than one year apart.

  • Staff-T1Staff-T1
    edited August 2022

    Yes both can have contracts issued more than one year apart. The difference is in the second and third bullet points under FV. If within a year, an entity is able to divide the groups they MUST do so under the modified retrospective approach whereas they CAN choose to do so under the fair value

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