The contract boundary

Learning objectives

• Explain that the cash flows included in the measurement are those within the boundary of the contract, defined by substantive rights and obligations.L2
• Assess, from the terms of a case, whether future premiums are within the boundary of the contract.L3

Normative references

• IFRS 17 §34The cash flows included in the measurement are those within the boundary of the contract, determined by substantive rights and obligations (end of the obligation to provide coverage or of the right to compel premiums, reassessment of risk and pricing).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• Lumière SA issues a one-year health insurance contract, renewable each year. Under the clauses of the case, at each renewal date Lumière may reassess the policyholder's risk and set for the following year a price that fully reflects that risk; the policyholder is not obliged to renew. Lumière must decide whether the premiums of the following year enter the measurement of the contract at issue. Write a short note concluding on this, distinguishing rule, case facts and professional judgement.L3