IFRS 17 · Case studies (Step 3 of 5)
Case study
Voyalis Assurances SA (fictitious entity) closes its accounts on 31 December 20X6. It manages a group of one-year travel insurance contracts, a group of three-year contracts, a group of savings contracts with participation, a quota share reinsurance treaty, a modified contract and three groups at the transition to IFRS 17. You prepare the technical note for the chief financial officer.
Your assignment
Judge the eligibility of groups P and Q for the premium allocation approach; for group P, compute the initial liability, the revenue of the quarter and the closing liability and record the three entries; prepare the outline of the reconciliation and of the insurance service result; judge whether group R falls under the variable fee approach and measure the adjustment of its margin; deal with the reinsurance held and the modification; choose the transition approach of each group and compute the margin of the fair value group; place the 2020 amendments, the classification overlay, the transition resource group paper and the provision; 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.
Autonomous professional situation
As on a real engagement: no method, no checklist and no hints. You identify the issues yourself, organise the work and defend your conclusion.
10 documents: open each one to read it.
Document 1Memo
Voyalis Assurances SA (fictitious entity) closes its accounts on 31 December 20X6, in EUR. Case conventions (pedagogical assumptions, not attributed to IFRS 17): revenue of group P allocated over time; entity share of 10% of the returns of group R; quota share of 40% of the treaty; fair value and fulfilment cash flows at transition given by the case, fair value belonging to IFRS 13; the case does not deal with the measurement at fair value.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Premium received for group P | €120,000.00 | |
| Acquisition cash flows deducted from the liability (zero: expensed) | €0.00 | |
| Acquisition cash flows expensed | €12,000.00 | |
| Premium to allocate over the coverage | €120,000.00 | |
| Months of coverage elapsed | 3 months | |
| Closing liability per the accounting records | €90,000.00 | |
| Claims incurred in the quarter | €11,000.00 | |
| Coverage period of group Q | 36 months | |
| Fair value of the fund at the opening | €5,000,000.00 | |
| Fair value of the fund at the closing date | €5,200,000.00 | |
| Entity share of the returns | 10% | |
| Adverse change relating to future service | €4,000.00 | |
| Loss of the underlying group S | €10,000.00 | |
| Quota share of the treaty | 40% | |
| Coverage before the amendment | 12 months | |
| Coverage after the amendment | 36 months | |
| Fair value of group T1 at transition | €530,000.00 | |
| Fulfilment cash flows of group T1 at transition | €480,000.00 | |
| Restoration obligation | €8,000.00 | |
| Stand invoice | €18,000.00 |
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.
Company profile and case conventions
Group P: one-year travel insurance contracts
Group Q: three-year contracts
Group R: savings with participation
Quota share reinsurance treaty
Contract M: amendment
Transition: three groups
Paper of the transition resource group
Note: provision for restoration
Invoice for a trade fair stand
Organise your work freely: deal with each point, then argue your conclusion.
Task 1Professional judgement
Group P: is it eligible for the premium allocation approach, and why?
Task 2Professional judgement
Group Q: is it eligible for the premium allocation approach?
Task 3Calculation
Group P: compute the initial liability for remaining coverage.
Part 1 · Calculation
Group P: compute the initial liability for remaining coverage.
Task 4Journal entries
Record the premium received.
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.
Line 1
Line 2
Task 5Journal entries
Record the acquisition cash flows expensed.
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.
Line 1
Line 2
Task 6Calculation
Group P: compute the revenue of the quarter.
Part 1 · Calculation
Group P: compute the revenue of the quarter.
Task 7Journal entries
Record the insurance revenue of the quarter.
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.
Line 1
Line 2
Task 8Calculation
Group P: compute the closing liability for remaining coverage.
Part 1 · Calculation
Group P: compute the closing liability for remaining coverage.
Task 9Analysis
Prepare the outline of the reconciliation of the liability and of the insurance service result of group P.
Part 1 · Calculation
Prepare the outline of the reconciliation of the liability and of the insurance service result of group P.
Task 10Professional judgement
Group R: do the contracts have direct participation features?
Task 11Analysis
Group R: measure the adjustment of the margin for the period.
Part 1 · Calculation
Group R: measure the adjustment of the margin for the period.
Task 12Analysis
Reinsurance held: how is the treaty measured and which component appears for the onerous group S?
Part 1 · Calculation
Reinsurance held: how is the treaty measured and which component appears for the onerous group S?
Task 13Professional judgement
Contract M: does the amendment lead to derecognition of the original contract?
Task 14Professional judgement
Transition: which approach for each of groups T1, T2 and T3?
Task 15Calculation
Group T1: compute the margin at the transition date (fair value approach).
Part 1 · Calculation
Group T1: compute the margin at the transition date (fair value approach).
Task 16Analysis
Place the June 2020 amendments and the classification overlay for Voyalis.
Task 17Analysis
Is the resource group paper a requirement? Does the restoration provision fall under IFRS 17?
Task 18Effects on the financial statements
What is the cumulative effect of the three entries on the financial statements?
Part 1 · Classification · Analysis
State the direction of the effect on each financial statement aggregate.
Financial position (balance sheet)
Profit or loss
Other comprehensive income
Equity
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 19Conclusion
Write the conclusion.
Your working draft for this file: points noted, leads, intermediate calculations.
Saved on this device only; never graded.
Complete every item of the file to submit it (0 / 24).
Document this file
These working papers use the data and results of this case.
Normative references