Exam 6C Practice Question 18
Study guide: Exam 6C
When IFRS 17 took effect in Canada for fiscal years beginning on or after January 1, 2023, an insurer held three blocks of in-force contracts:
- Block 1: multi-year commercial contracts with complete historical pricing and cash flow records.
- Block 2: long-duration contracts acquired many years ago, for which the original assumptions were never kept. After every reasonable effort, the insurer cannot reconstruct them and has no reasonable and supportable information with which to approximate them.
- Block 3: contracts for which full reconstruction is impracticable, but reasonable and supportable information exists for an approximation.
Which assessment of the transition approaches is correct?
- A) The insurer may choose the fair value approach for all three blocks, since it is the least costly to apply
- B) Block 2 must use the modified retrospective approach, because it is the closest approximation to full retrospective application
- C) Block 1 requires full retrospective application, and Block 2 can use the fair value approach
- D) All three blocks may keep their IFRS 4 measurement, because IFRS 17 grandfathers contracts already in force
- E) Block 3 must use the fair value approach, because full retrospective application is impracticable for it
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