IASP4: Investiční smlouvy
Oceňování investičních smluv a smluv o
službách
Jiří Fialka, Partner, Actuarial & Insurance Solutions
Seminář z aktuárských věd, 25. listopadu 2005
.
Agenda

Measurement

Investment Contracts
– Amortised costs
– Fair value

Service Contracts
Page 2
Source
International Actuarial Standard of Practice No.4, Practice Guideline:
Measurement of Investment Contracts and Service Contracts under
IFRS [2005]
as prepared by the International Actuarial Association, published 16
June 2005
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OCEŇOVÁNÍ
Page 4
Initial measurement of investment
contracts
IAS39.43:

Fair Value

+ directly attributable transaction costs (does not apply to liability
at FV through PL)
Interpretations:
1) Some transaction costs to be subtracted from liability
2) All transaction costs and fees relate to the investment management
contract and should be deferred
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Treatment of transaction costs

IAS 39 prohibits the deferral and amortisation of transaction costs
for financial instruments through the concept of a deferred
ACQUISITION COST asset.

In respect of service contracts the IFRSs permit transaction costs
for the service element to be deferred to match the related fees
(IAS 18, Appendix A, paragraph 14(b)(iii)).
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Subsequent measurement
Depends on the accounting policy:

at amortised cost, using the EFFECTIVE INTEREST METHOD

except for financial liabilities measured at fair value through profit
and loss
If the reporting entity’s policy does not specify, then the practitioner
may choose to apply an internally consistent approach and
document the approach selected…
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INVESTIČNÍ SMLOUVY: MODEL
AMORTIZOVANÝCH NÁKLADŮ
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Amortised cost model - appoach





Not deferred initial fees covering transaction costs are subtracted
from the liability and treated as one of the cash flow items in
calculating the effective interest rate
Cash flows typically would be developed based on expected
surrenders
Margins for risk and uncertainty are NOT included in the cash flows
The expected cash flows normally would be determined for each
duration and, therefore, it would be appropriate to select an
appropriate probability distribution for each duration
Appropriate requirements under IFRSs, such as a minimum floor,
would apply.
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Amortised cost model – technical aspects

administrative costs are not to be included in the projected cash
flows

contractual loadings or fees would be included in the projected cash
flows

inclusion or exclusion of renewal payments may be part of the
accounting policy

non-DPF bonuses should be included
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Amortised cost model – Minimum floor

IAS 39, AG30(g) (also BC94)

If the surrender value is more than the amortised cost of the
liability, and

the surrender value is more than the fair value of the benefit at
maturity

the reporting entity should measure the investor’s option to
surrender at the expected surrender value. This would be an
embedded derivative and would be measured as such.

This also would provide an effective minimum floor for financial
instruments on an amortised cost measurement.
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INVESTIČNÍ SMLOUVY: MODEL
FÉR HODNOTY
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Fair value model - approach

Selection of an appropriate model

Selection of current estimate assumptions

The determination of margins for risk and uncertainty

Availability of market data to calibrate the provisions for risk and
uncertainty

Application of the requirements of IFRSs
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Market Value Margins

Margins for risk and uncertainty need reflect the compensation for
risk required by a typical third party to take on the liability.

It may not be necessary to include a margin in respect of every
assumption, and the selected risk margins need not imply a
particular level of confidence.

There is no commonly accepted practice for the application of the
concepts.
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Market Value Margins (2)
Uncertainty may result from one or more:
 Errors of estimation that may be favourable or adverse
 Deterioration or improvement
 Statistical fluctuation.
A larger margin is appropriate if:
 There is less confidence in the current estimate assumption
 The event is further in the future
 The potential consequences of the event assumed are more severe
 The occurrence of the event assumed is more subject to statistical
fluctuation
 The risk is not diversifiable.
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Assumptions, calibration, minimum floor

In the FINANCIAL REPORTING period in which a financial
instrument is first recognised, adopting assumptions different from
pricing assumptions … would need a good reason

IAS 39.49 requires at each valuation date a fair value that is at
least equal to the amount payable on demand
which means

Fair Value ≥ Surrender Value
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SMLOUVY O SLUŽBÁCH
Page 17
Service contracts: approach

Revenue is recognised by reference to the stage of completion of
the services

The fees need to be allocated among services according to the
nature and substance of the services provided

Reliable cash flows are needed to measure the expected revenue
and the stage of completion of the transaction needs to be reliably
determined

Margins for risk and uncertainty will NOT normally be included in
the cash flows

Requirements under IFRSs apply
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Front-end fees
IAS 18, Appendix A, paragraph 14(a)(iii)

Front-end fees are deferred in the same manner as transaction
costs.

If it can be shown that such fees are directly related to the
transaction cost, they can be netted with simultaneously incurred
transaction cost.

Otherwise, deferral of front-end fees and of transaction costs are to
be separated, the first a liability, the second an asset, with no offset allowed .
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Transaction costs

The transaction cost is amortised in proportion to the nature of the
service fees as outlined in the IFRSs.

Projection of the total fees to amortise the transaction cost over the
life of the contract, for example, a portion of the investment
management fees.

Amortisation of deferred transaction cost and the test on
recoverability can be based on a portfolio level.
Page 20
Other requirements
IAS 18, Appendix, paragraph 14(b)(iii)

Recoverability test at a portfolio level

For more guidance refer to IAS36, IAS37, IAS38, and IASP6
Liability Adequacy Testing, Testing for Recoverability of Deferred
Transaction Costs, and Testing for Onerous Service Contracts under
IFRS [2005]
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