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IFRS 13 Relief from royalty method

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IFRS 13 Relief from royalty methodIFRS 13 Relief from royalty method – The ‘Royalty Relief’ (also known as Relief from Royalty) method is based on the notion that a brand holding company owns the brand and licenses it to an operating company.  One method to determine the market value of Intellectual Property assets like patents, trademarks, and copyrights is to use Relief from royalty method (also known as Royalty avoidance approach or Royalty Relief approach). This approach determines the value of Intellectual Property assets by estimating what it would cost the business if it had to purchase the Intellectual Property (IP) it uses from an outsider. Other valuation methods are provide here.

This approach requires the valuator to

  1. project future sales
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Calculations IFRS 16 Leases

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Calculations IFRS 16 Leases is a case regarding fixed lease payments depending on an index and rent-free period. This case is rather simple, fixed payments depending on an index and rent-free period. Here are only included the journal entries to be made at the inception of the lease contract.

This contract comprises a lease contract for the lease of office space, archive space, inside garage space and outside parking places. The contract consist of special and general conditions. The special conditions prevail the general conditions. Calculations IFRS 16 Leases

The lease contract has a lease term of 12 consecutive years (144 months), starting date is 1 March 2015, ending date is 28 February 2027. Tacit renewal Read more

Key differences between GM and VFA Insurance

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Key differences between GM and VFA Insurance – The Variable Fee Approach (‘VFA’) is a modification of the General Model. The General Model is applied to insurance contracts without participation features or to insurance contracts with participation features that fail the Variable fee scope test. Thus, the VFA is applied to insurance contracts with direct participation features that contain the following conditions at initial recognition:

  1. the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
  2. the entity expects to pay to the policyholder an amount equal to a substantial share of the returns from the underlying items; and
  3. a substantial proportion of the cash flows the entity expects
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Disclosure requirements IFRS 4 and IFRS 17

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Disclosure requirements IFRS 4 and IFRS 17 – Explanation of recognized amounts from IFRS 4 to IFRS 17

1 Introduction Disclosure requirements IFRS 4 and IFRS 17

[IFRS 17 (98), IFRS 17 (93)-(96)]

Disclosure requirements IFRS 4 and IFRS 17IFRS 4 requires an entity to disclose information that identifies and explains the amounts in its financial statements arising from insurance contracts. In order to comply with this objective, IFRS 4 outlines what should be disclosed regarding reconciliations, policies, methods and processes but provides limited guidance on how these disclosure requirements should be met.

IFRS 17 requirements are much more extensive. It requires the entity to provide specific reconciliations showing how the net carrying amounts of insurance contracts changed during the Read more

Disclosure of significant judgments for insurances

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Disclosure of significant judgments for insurances – Consistent with IAS 1, IFRS 17 requires disclosure of significant judgment and changes in judgment that an entity makes in applying the standard [IFRS 17 93 and IAS 1 122]. Specifically, an entity must disclose the inputs, assumptions and estimation techniques it has used, including [IFRS 17 117]:

  • Methods to measure insurance contracts within the scope of IFRS 17 and processes to estimate the inputs to those methods. Unless impracticable, an entity must also provide quantitative information about those inputs.
  • Any changes in methods and processes for estimating inputs used to measure contracts, the reason for each change, and the type of contracts affected.
  • to the
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Presentation Insurance contracts

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Presentation Insurance contractsPresentation Insurance contracts – IFRS 17 specifies minimum amounts of information that need to be presented on the face of the statement of financial position and statement of financial performance. These are supplemented by disclosures to explain the amounts recognized on the face of the primary financial statements (see ‘Disclosure of Insurance contracts’).

IFRS 17 requires separate presentation of amounts relating to insurance contracts issued and reinsurance contracts held in the primary statements. There is nothing to prevent an entity from providing further sub-analysis of the required line items (which may make the relationship of the reconciliations to the face of the statement of financial position more understandable).

Indeed, IAS 1 Presentation of Financial Statements requires presentation Read more

Measurement of contracts with participation features

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Measurement of contracts with participation features – Entities that issue participating contracts (referred to in the standard as contracts with participation features) provide policyholders with a financial return on the premiums they pay by sharing the performance of underlying items with policyholders. Participating contracts can include cash flows with different characteristics, for example:

  • Cash flows that do not vary with returns from underlying items, e.g., death benefits and financial guarantees Measurement of contracts with participation features
  • Cash flows that vary with returns from underlying items — either via a contractual link to the returns on underlying items or through an entity’s right to exercise discretion in determining payments to policyholders Measurement of contracts with participation features

The Read more

Reinsurance contracts held

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Reinsurance contracts held – A reinsurance contract is an insurance contract issued by one entity (the reinsurer) to compensate another entity for claims arising from one or more insurance contracts issued by the other entity (underlying contracts).

IFRS 17 requires a reinsurance contract held to be accounted for separately from the underlying insurance contracts to which it relates. This is because an entity that holds a reinsurance contract (a cedant) does not normally have a right to reduce the amounts it owes to the underlying policyholder by amounts it expects to receive from the reinsurer.

A cedant measures reinsurance contracts it holds by applying a modified version of the general model or, if the contract is eligible, Read more

Measurement of remaining coverage

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Measurement of remaining coverage – An entity measures the liability for remaining coverage on initial recognition of a group of insurance contracts eligible for the premium allocation approach (PAA) that are not onerous, as follows (IFRS 17 55]:

  • The premium, if any, received at initial recognition
    Minus Measurement of remaining coverage
  • Any insurance acquisition cash flows at that date, unless the entity is eligible and chooses to recognise the payments as an expense (coverage period of a year or less)
    Plus or minus Measurement of remaining coverage
  • Any amount arising from the derecognition at that date, the asset or liability recognised for insurance acquisition cash flows that the entity pays or receives before the group
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