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IFRS 17Workpapers (Step 4 of 5)

Workpaper template

Step 4 of 5
WorkpaperIFRS 17 — Insurance ContractsL2 · L3

Eligibility for the premium allocation approach or the variable fee approach, liability for remaining coverage, revenue of the period and entries

4 missions10 sections to document75 min
Prepared by
AI-assisted draft
Reviewed by
Not reviewed — human review required
Status
Published

Objective of the workpaper

Record the coverage period of each contract of the group, the variability expected in the flows and the participation clauses. Judge the eligibility for the premium allocation approach, then for the variable fee approach. For an eligible group, compute the initial liability, the revenue of the period (allocation over time: case assumption) and the closing liability, then record the entries.

10 sections · 32 blocks · 6 calculations · 3 entries

  • IFRS 17 §53
  • IFRS 17 §B101

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

4 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Premium allocation approach, variable fee approach, reinsurance held, modification, transition and disclosures
Case tasks documented here
  • Group P: is it eligible for the premium allocation approach, and why?
  • Group Q: is it eligible for the premium allocation approach?
  • Group P: compute the initial liability for remaining coverage.
  • Record the premium received.
  • Record the acquisition cash flows expensed.
  • Group P: compute the revenue of the quarter.
  • Record the insurance revenue of the quarter.
  • Group P: compute the closing liability for remaining coverage.
  • Group R: do the contracts have direct participation features?
  • Group R: measure the adjustment of the margin for the period.
1

Facts and data

Inputs

  • Group of contracts: portfolio, recognition date, contracts concerned

    TextRequired

    ONE_YEAR_TRAVEL_CONTRACTS_ISSUED_ON_1_OCTOBER_20X6

  • Coverage period of each contract and variability of the flows expected at inception

    Text

    TWELVE_MONTH_COVERAGE_AND_ACQUISITION_CASH_FLOWS_EXPENSED

  • Participation clauses: underlying items, share of the policyholder, variation of the amounts paid

    Text

  • Premium received at initial recognition

    Number

    120,000

  • Acquisition cash flows deducted from the liability (zero if expensed)

    Number

    0

  • Acquisition cash flows expensed at inception

    Number

    12,000

  • Premium of the coverage period to allocate over time

    Number

    120,000

  • Months of coverage elapsed at the closing date

    Number

    3 months

  • Closing liability per the accounting records

    Number

    90,000

  • Fair value of the underlying items at the opening date

    Number

  • Fair value of the underlying items at the closing date

    Number

  • Entity's share of the change in fair value (%)

    Number

  • Adverse change in the flows relating to future service

    Number

2

Supporting documents

Evidence

  • Documents obtained and referenced (contract terms, note on the variability of the flows, participation clauses, premium statement)

    EvidenceRequired

3

Analysis of the eligibility

Analysis

IFRS 17 §53IFRS 17 §B101

  • Points examined: eligibility conditions and simplified measurement

    ChecklistRequired

    • Premium allocation approach: no material difference expected from the general model, or coverage period of one year or less
    • Eligibility assessed at the inception of the group
    • Variable fee approach: identified pool of underlying items, substantial share of the returns, substantial variation of the amounts paid
    • Criteria of the variable fee approach assessed at the inception of the contract
    • Expensing of acquisition cash flows when the coverage period is one year or less
4

Calculations

Calculations

IFRS 17 §53IFRS 17 §B101

  • Initial liability for remaining coverage (premium received − acquisition cash flows deducted)

    Calculation

    120,000

    Premium received at initial recognition ; − Acquisition cash flows deducted from the liability (zero if expensed)

  • Revenue of the period (premium × months elapsed ÷ 12, allocation over time)

    Calculation

    30,000

    Premium of the coverage period to allocate over time ; Months of coverage elapsed at the closing date

  • Closing liability (initial liability − revenue of the period)

    Calculation

    90,000

    Initial liability for remaining coverage (premium received − acquisition cash flows deducted) ; − Revenue of the period (premium × months elapsed ÷ 12, allocation over time) ; Closing liability per the accounting records

  • Change in the fair value of the underlying items (closing − opening)

    Calculation

    0

    Fair value of the underlying items at the closing date ; − Fair value of the underlying items at the opening date

  • Entity's share of the change (change × share)

    Calculation

    Change in the fair value of the underlying items (closing − opening) ; Entity's share of the change in fair value (%)

  • Net adjustment of the margin (entity's share − adverse change in the flows relating to future service)

    Calculation

    0

    Entity's share of the change (change × share) ; − Adverse change in the flows relating to future service

5

Illustrative entries

Entries

  • Entry of the premium received

    Entry

    AccountDebitCredit
    Cash: premium received120,000
    Insurance contract liability120,000

  • Entry of the revenue of the period

    Entry

    AccountDebitCredit
    Insurance contract liability30,000
    Insurance revenue30,000

  • Entry of the acquisition cash flows expensed

    Entry

    AccountDebitCredit
    Insurance service expenses12,000
    Cash paid12,000
6

Judgments: eligibility for the simplified approaches

Judgment

IFRS 17 §53IFRS 17 §B101

  • Eligibility for the premium allocation approach

    JudgmentRequired

    Eligible: coverage period of one year or less

    Eligible: coverage period of one year or less / Eligible: no material difference expected from the general model / Not eligible: general model / Not applicable

    Professional judgment: the reasonable expectation of no material difference is assessed at the inception of the group; a high expected variability of the flows calls it into question.

  • Rationale: coverage period, expected variability of the flows, comparison with the general model (case data)

    Text

    COVERAGE_PERIOD_OF_EACH_CONTRACT_IS_TWELVE_MONTHS

  • Eligibility for the variable fee approach

    JudgmentRequired

    Not applicable

    Three criteria met: variable fee approach / Criteria not met: general model / Not applicable

    Professional judgment: "substantial" is assessed on the clauses of the contract; no percentage is presented here as imposed by the standard.

  • Rationale: underlying items, substantial share of the returns, variation of the amounts paid

    Text

7

Items to document for the notes

Disclosure

IFRS 17 §53IFRS 17 §B101

  • Information to prepare on the simplified approaches

    Checklist

    • Approach applied to each group and reason for the eligibility
    • Reconciliation of the liability for remaining coverage
8

Effect on the financial statements

FS impact

  • Effect derived from the entries

    Table

9

Conclusion

Conclusion

  • Eligibility of the group for the simplified approaches, initial liability, revenue of the period, closing liability and entries

    ConclusionRequired

10

Normative references

References

  • Normative references cited in this workpaper

    References

11

Checks and financial statement impact

  • Group describedPass
  • Eligibility for the premium allocation approach judged and supportedPass
  • Eligibility for the variable fee approach judged and supportedPass
  • Recomputed liability = liability in the accounting recordsPass
  • Premium entry balancedPass
  • Revenue entry balancedPass
  • Acquisition entry balancedPass
Assets
108,000
Liabilities
90,000
Profit or loss
18,000
OCI
0
Equity
18,000