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- if derivative is itself an insurance contract, no need to separate and measure at fair value a policyholder’s option to surrender insurance contract.
- exception if surrender value varies in response to change in a financial variable
Unbundling of insurance and deposit component is required if
- insurer can measure the deposit component separately (otherwise can’t unbundle)
- insurer’s accounting policies do not otherwise require it to recognize all obligations and rights arising from the deposit component
- permitted but not required if required to recognize all obligations and rights from deposit
Changes in accounting policies
- an insurer may change its accounting policies for insurance contracts if, and only if, the change makes the financial statement more relevant to the economic decision-making needs of users and no less reliable, or more reliable and no less relevant to those needs
- current interest rates: permitted to change policy to remeasure current market value
- continuation of existing practices: can continue to use undiscounted liabilities, measure contractual rights at amount exceeding fair value, use non-uniform accounting policies but can’t introduce those practices
- prudence: no need to change accounting to eliminate excessive prudence; don’t introduce more either.
- info that identifies and explains amounts arising from insurance contracts
- info that enables users to evaluate the nature and extent of risks arising from ins. cont.
Uncertain future event
- whether an insured event will occur; OR
- when it will occur; OR
- how much the insurer will need to pay if it occurs