Part 17 (Odomirok 24)

Question 1

What accounting framework is used internationally

Answer 1

IFRS

International Financial Reporting Standards

Question 2

Who issued the IFRS

Answer 2

IASB issued the International Financial Reporting Standards

Question 3

What is the IFRS designed to do

Answer 3

Provide global users across industries with transparent and comparable information

Question 4

Who does the SEC allow to file IFRS statemetns

Answer 4

Only foreign insurers currently

Question 5

Who does the IFRS apply to

Answer 5

All different industries including insurance industry

Question 6

What was the IASB unable to produce in time for when the IFRS was first rolled out?

Answer 6

Insurance specific Standards

Question 7

What did it release as an interim standard because of it not issuing insurance specific standards initially?

Answer 7

IFRS 4

Question 8

What problems did IFRS 4 have?

Answer 8

Not consistent
Allowed insurers to use a wide variety of accounting practices for insurance contracts

This caused much variation among countries

Question 9

What did the IASB issue to supersede IFRS 4 due to lack of consistency

Answer 9

IFRS 17

Question 10

What were the objectives of IFRS 17

Answer 10

• Required consistent insurance practices across jurisdictions
• Improved quality of financial information
• Provided a definition for an insurance contract

Question 11

How did IFRS 17 improve the quality of financial information

Answer 11

Included useful information in the financials

Increased the transparency of the insurers’ profitability

Question 12

What is the definition of an insurance contract under IFRS 17

Answer 12

A contract under which one party accepts significant insurance risk from another party by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder

Question 13

What is the key difference between the definition of an insurance contract under IFRS 17 and the US definition

Answer 13

The use of compensate in IFRS 17 instead of indemnify. It could mean that a company pays only 1 dollar to compensate a large loss and still meet criteria.

Question 14

What is a measurement model that the IFRS introduced

Answer 14

General Model and General Model: Premium Allocation Approach

Question 15

In the General Model, insurance contracts need to be reported in the balance sheet as the total of what two items

Answer 15

Fulfillment cash flows

Contractual service margin (CSM)

Question 16

What is the Fulfillment cash flows

Answer 16

current estimate of the amounts that the insurer expects to collect/pay for premiums, claims, befits, and expenses

Question 17

Fulfillment cash flows should include adjustment for what

and at each reporting date do what

Answer 17

timing and risk

update its valuation of the fulfillment cash flows based on current information (such as updated discount rates)

Question 18

What is CSM

Answer 18

Contractual service margin is the expected profit for providing the future coverage

Question 19

What is CSM initially calculated on

What is the minimum on the calculation

And what happens if calculation produces a negative number at inception

Answer 19

Net difference between fulfillment cash inflows and outflows

Minimum of 0

Recognized as a loss in the income statement immediately

Question 20

What is the premium allocation approach

Answer 20

a simplification of the general model

Question 21

When can insurers implement the Premium allocation approach option

Answer 21

If expected to produce results not materially different from the General Model

and does not contain any complex features

Question 22

How does premium alloc approach split contracts into two pieces

Answer 22

• Liability for remaining coverage
• Liability for incurred claims

Question 23

What is the liability for remaining coverage

Answer 23

about equal to UEPR less any premium receivable and deferred acquisition costs

Question 24

What is the liability for incurred claims

Answer 24

Calculated using the fulfilment cash flows form the General Model (no CSM since coverage has already been earned)