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List 3 reasons that private companies will need to understand IFRS
accounting, even if they do not follow them, in order to remain competitive:

1. Raising capital in a foreign market
2. Conducting transactions with an international company


List 2 concerns that the NAIC has about using IFRS as
the basis for SAP:

1. Transition costs
2. Complexity of reserve calculations


What is IASB's definition of significant insurance risk:

Significant if, and only if, an insured event could cause an
insurer to pay significant additional benefits in any scenario, excluding scenarios that lack commercial substance.


Explain why the IASB standard of significant insurance
risk is weaker than the GAAP standard:

GAAP requires that it is reasonably possible that the reinsurer may realize a significant loss.


Describe the liability adequacy test:

The insurer needs to assess whether its insurance liabilities
are adequate at each reporting date. This is based on current
estimates of future cash
flows, including the cost of handling the claims, and any options or guarantees.


In IFRS 4, under what circumstances can an insurer
change its accounting principles:

If that change:
-Makes the financial statements more relevant to the user's decisions, without being less reliable; or
-Makes the statements more reliable, without being less


In GAAP, under what circumstances can an insurer
change its accounting principles:

As long as they can justify that they are preferable to the


Compare the GAAP to the IFRS treatment of offsetting:

Both do not allow offsetting


Compare the GAAP to the IFRS treatment of revenue

-GAAP records the revenue associated with the insurance
premium over the duration of the contract.
-IFRS recognizes the present value of all premium and
expenses as soon as the contract is signed


List 2 reasons that the volatility of results after IFRS is
used should increase:

1. IFRS does not allow an unearned premium reserve, so the incoming revenue will not be smoothed over time
2. IFRS also does not recognize deferred acquisition costs


Reason that insurer ratings should not deteriorate after
IFRS is implemented, despite the higher volatility of

Users should benet from the increased transparency


Compare the GAAP to the IFRS treatment of catastrophe reserves:

Neither allow


What categories must investment assets of insurers be grouped into under IFRS:

-Held to maturity: historic cost less amortization
-Available for sale: "marked to market". Changes in market
value are recorded in reserves
-Held for trading: "marked to market". Changes in market
value are recorded as income


Explain the implications of the IFRS requirement that
insurance contracts that have both insurance and
investment features be unbundled and accounted for

As a result, some products, that may be less protable on a
stand alone basis, may need to be modified or discontinued.
In addition, some products (eg life insurance contracts) may
need to be modified (shortened) to reduce the volatility.