The Committee on Property and Casualty Insurance Financial Reporting (PCFRC) has prepared this draft educational note to provide guidance related to setting and applying discount rates (including cash flow considerations) for the purposes of calculating the present value of estimates of future cash flows under IFRS 17.
This draft educational note is structured in sections as follows:
• Sections 1 and 2, respectively, provide an introduction and a list of the terminology used in this draft educational note.
• Sections 3 through 7 illustrate various considerations in determining an entity’s fulfilment cash flows, including selecting an IFRS 17 discount curve.
• Sections 8 through 13 provide additional guidance around the application of discount rates, measuring changes in discounting assumptions, and other aspects of financial statement presentation.
• Section 14 describes the illustrative examples set out in Appendices 1 through 7, detailed in the Excel file that forms part of this draft educational note.
This draft educational note is focused on the Canadian market, economic environment, and products. Similar considerations and approaches could be used for setting the discount rates for other currencies. It is written from the perspective of Canadian actuaries and is not intended to duplicate any other guidance. Additional information that provides more details can be found in IAA guidance or other CIA documents.