CIA.IFRS17-PAA

Question 1

Describe the carrying amount for LRC on initial recognition using PAA

Answer 1

premiums received (at initial recognition)
- acquisition cash flows at that date (unless already expensed)
+ any assets for acquisition cash flows derecognized
- liabilities previously recognized

Question 2

What are the 3 considerations in accessing the eligibility to PAA

Answer 2

• coverage period of each contract in the group ≤ 1 year (if yes than eligible, if not next consideration)
• LRC calculated under the PAA would not be materially different that under the GMA (estimated at inception)
• do not expect significant variability in the cash flows that would affect the measurement of the liability

Question 3

Briefly describe 2 approaches to determine whether measurement differences between PAA and GMA differ materially

Answer 3

• Quantitative assessment: compare the LRC under the 2 measurement approaches for one reporting period
• Qualitative assessment: if the outcome of the “differ materially” assessment is obvious a qualitative assessment is sufficient (ex.: if a formal assessment has been done to similar groups of contracts)

Question 4

Do onerous contracts always pass the eligibility test for PAA?

Answer 4

yes, there could never be a material difference between the PAA and GMA estimates of the LRC

for onerous contracts:
LC = LRC GMA - LRC PAA
LRC PAA = LRC PAA + LC (recognize a loss component because onerous)
LRC PAA = LRC PAA + (LRC GMA - LRC PAA)
LRC PAA = LRC GMA