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IFRS 17Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIFRS 17L2 · Intermediate

Portfolios, profitability groups, annual cohorts, recognition and contract boundary, and the loss of an onerous group

8 documents10 tasks≈ 75 min
0 / 12 items completed
Standards
IFRS 17 — Insurance Contracts
Assistance levelHelp on demand · assistance on request
  • Method: on request
  • Checklist: on request
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Quérin Assurances SA (fictitious entity), established in the European Union, issues motor and home contracts and closes its accounts on 31 December 20X6. You prepare the grouping of the contracts issued and the initial recognition of the onerous group.

Your assignment

Identify the portfolios; classify the three sets of motor contracts into their profitability group; compute the loss of the onerous group and record it; say which home contracts may be in the same group; state whether the European Union exemption from annual cohorts applies; determine the recognition date of two contracts and the boundary of the motor contract; present the effect on the financial statements 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.

Intermediate level: help remains available, on demand.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 8 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 12) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

8 documents: open each one to read it.

Document 1Memo

Company profile and case conventions

Quérin Assurances SA (fictitious entity) is established in the European Union and prepares its consolidated accounts under the IFRS adopted in the Union. It closes its accounts on 31 December 20X6, in EUR. Case conventions: the fulfilment cash flows of each set of contracts are data from the actuarial team; case convention (pedagogical assumption, not attributed to IFRS 17): the onerous group is recognised with no margin, the loss being the object of the entry.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Motor contracts issued in 20X64,000 units
Home contracts issued2,500 units
Fulfilment cash flows of the young drivers (net outflow)€36,000.00
Net inflow of the experienced drivers€90,000.00
Net inflow of the other drivers€20,000.00
Floor of the loss (zero)€0.00
Database invoice€6,000.00

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 sort8

  • Company profile and case conventions

  • Portfolios of contracts issued

  • Actuarial note: profitability of the motor contracts at issue

  • Home contracts: issue dates

  • Head office note: European Union exemption

  • Motor contracts A-101 and A-102: dates

  • Renewal terms of the motor contract

  • Invoice for a database subscription

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      10 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

        Which contracts form a portfolio? How many portfolios does Quérin manage?

      2. Task 2Professional judgement

        Classify each of the three sets of motor contracts into its profitability group.

      3. Task 3Calculation

        Compute the loss of the onerous group at initial recognition.

        Calculator

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

        Part 1 · Calculation

        Compute the loss of the onerous group at initial recognition.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Journal entries

        Record the loss of the onerous group.

        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

      5. Task 5Professional judgement

        Which home contracts may be in the same group? May H1 and H4 be?

      6. Task 6Analysis

        Does the European Union exemption from annual cohorts apply? Is it an option of the IASB IFRS?

      7. Task 7Analysis

        What is the recognition date of contracts A-101 and A-102?

      8. Task 8Analysis

        How far does the boundary of the motor contract go?

      9. Task 9Effects on the financial statements

        What is the effect of the loss on the financial statements?

        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. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      10. Task 10Conclusion

        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 / 12).

      Document this file

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

      Normative references

      • IFRS 17 §22