CIA – Subsequent Events
Subsection 1110 of the Standards of Practice defines a subsequent event as “an event of which an actuary first becomes aware after a calculation date but before the corresponding report date.”
If you want full marks, you’ll need to walk through your logic.
- When did the actuary first become aware of the event?
- Does the event reveal a defect or calculation error? (Y-reflect)
- When did the event occur? (Before calc -reflect)
- Does the event make the entity different? (Before calc -reflect)
- After: report event, but do not include.
Does the event make the entity different?
This question is the hardest part of this exercise and for the exam I would read it as literally as possible (see question 32b in Fall 2012).
This question is likely the most challenging for the actuary to answer. The response to this question determines whether or not the effect of the event is to be reflected in the work (i.e., included in the calculations of insurance contract liabilities) or only reported (i.e., included in disclosure). The response to this question determines whether the event is an adjusting or a non-adjusting (subsequent) event as defined by Canadian accounting standards.
re: reserving changes in Alberta (event occurred February 8, 2008)
While the conclusions were not consistent among all auditing firms and all insurers, most classified the Alberta court decision as an adjusting event, an event that provided further evidence of conditions that existed at the December 31, 2007 financial statement date.
Subsequent Events (awareness vs. actual)
An actuary can only do something about something they are aware of. If a claim is missing, but no one tells them then all is lost.
Awareness Before (calculation date)
Awareness During Report (calculation date to report date)
While working on the report, if a event occurs that…:
- provides information about the entity as it was at the calculation date,
- retroactively makes the entity different at the calculation date, or
- makes the entity different after the calculation date and a purpose of the work is to report on the entity as it will be as a result of the event.
You need to reflect it in the work. The focus on this is events, information, disclosures that occur during the report creation process that are material to the report and how to manage them.
Any errors should be reflected. If the report is released and a event occurs that invalidates the report it must be retracted (rare)