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Practical caseIFRS 17L3 · Advanced

Subsequent measurement: margin roll-forward, coverage units, loss component, insurance service result and finance expense

7 documents16 tasks≈ 90 min
0 / 18 items completed
Standards
IFRS 17 — Insurance Contracts
Assistance levelNo help · reduced assistance
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Tarvelle Assurances SA (fictitious entity) closes its accounts on 31 December 20X7. Two groups issued in 20X6 are to be followed: group P (protection, profitable) and group Q (property, onerous). You prepare the margin roll-forward, the reversal of the loss component, the insurance service result and the finance expense of the year.

Your assignment

For group P, compute the interest on the margin, the margin before release, the release by coverage units and the closing margin, then record the release; for group Q, compute the reversal of the loss component; compute the insurance service result and the finance expense, record the claims, the accretion and the part in other comprehensive income; identify the two components of the liability; present the cumulative effect and conclude. One document is not useful.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Advanced level: no help, the work is grouped by kind.

Documents

File documents

7 documents: open each one to read it.

Document 1Memo

Company profile and case conventions

Tarvelle Assurances SA (fictitious entity) closes its accounts on 31 December 20X7, in EUR. Groups P and Q were recognised in 20X6. Case conventions (pedagogical assumptions, not attributed to IFRS 17): locked-in rate of 5% for group P and the portfolio, current rate of 6%; coverage unit: insured capital multiplied by the duration; the favourable change first reduces the loss component, within the limit of its balance; the liability is presented as a liability for remaining coverage and a liability for incurred claims.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Opening margin of group P€120,000.00
Locked-in rate of group P5%
Favourable change relating to future service€8,000.00
Adverse change relating to future service€2,000.00
Margin before release per the accounting records€132,000.00
Coverage units provided in 20X7100 units
Coverage units expected after 20X7300 units
Share of the units of the period (case fraction)25%
Balance of the loss component€20,000.00
Favourable change in the flows of group Q€25,000.00
Insurance revenue of the period€150,000.00
Claims incurred in the period€95,000.00
Other insurance service expenses€25,000.00
Opening liability for remaining coverage€330,000.00
Opening liability for incurred claims€70,000.00
Opening liability of the portfolio€400,000.00
Locked-in rate of the accretion5%
Part in other comprehensive income€4,000.00
IT audit invoice€12,000.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort7

  • Company profile and case conventions

  • Group P: margin and movements of 20X7

  • Actuarial note: coverage units of group P

  • Group Q: loss component

  • Insurance service result of 20X7

  • Liability and finance expense of 20X7

  • IT audit invoice

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      16 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        What are the two components of the liability of the group, and in which are the claims already incurred?

      2. Task 2Calculation

        Group P: compute the interest on the margin.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Group P: compute the interest on the margin.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Calculation

        Group P: compute the margin before release.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Group P: compute the margin before release.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Professional judgement

        Does the coverage unit used reflect the quantity of benefits and the expected coverage duration?

      5. Task 5Calculation

        Group P: compute the release of the period.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Group P: compute the release of the period.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Calculation

        Group P: compute the closing margin.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Group P: compute the closing margin.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      7. Task 7Journal entries

        Record the release of the margin to insurance revenue.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      8. Task 8Calculation

        Group Q: compute the reversal of the loss component.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Group Q: compute the reversal of the loss component.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Calculation

        Compute the insurance service result.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the insurance service result.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      10. Task 10Journal entries

        Record the claims incurred in the period.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      11. Task 11Calculation

        Compute the insurance finance expense of the period at the locked-in rate.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the insurance finance expense of the period at the locked-in rate.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      12. Task 12Journal entries

        Record the finance expense in profit or loss.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      13. Task 13Professional judgement

        The choice to disaggregate the finance expense: where does the part due to the change in rate go?

      14. Task 14Journal entries

        Record the part in other comprehensive income.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      15. Task 15Effects on the financial statements

        What is the cumulative effect of the four entries on the financial statements (excluding the reversal of the loss component of Q, which has no entry in the case)?

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      16. Task 16Conclusion

        Write the conclusion.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 18).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IFRS 17 §B119
      • IFRS 17 §88