The Committee on Life Insurance Financial Reporting (CLIFR) and the Committee on Property and Casualty Insurance Financial Reporting (PCFRC) have prepared this report to provide information concerning expenses in accordance with IFRS 17 requirements.
The explanatory report is structured into six sections. Section 1 introduces the content presented in this explanatory report. The second section highlights the differences between IFRS 4 and IFRS 17 with regards to expenses. Section 3 constitutes the main section of the report, and presents considerations related to expenses under IFRS 17 with a focus on the concept of directly attributable expenses. The fourth section presents specific examples and considerations related to potential grey areas regarding classification of expenses as directly versus non-directly attributable, while Section 5 discusses other miscellaneous topics. The sixth and final section recommends disclosures that could be included in the Appointed Actuary’s report to enable regulators to assess the range of practice regarding directly attributable expense classification in Canada. Appendix 1 provides an illustration of the LRC at initial and subsequent measurement under PAA including the treatment of deferred acquisition costs. Appendix 2 provides further detail on some expense types such as expenses included within liability for incurred claims (LIC) cash flows, expenses payable to the purchaser of the insurance or reinsurance contracts and expenses payable to intermediaries.