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What is liability adequacy test?

What is liability adequacy test? how do you assess that?

asked Sep 24, 2017 in IFRS 4 - Insurance Contracts by griffinth

1 Answer

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An insurer is required to assess at the end of each reporting period whether its recognised insurance liabilities are adequate, using current estimates of future cash flows under its insurance contracts. If that assessment shows that the carrying amount of its insurance liabilities is not sufficient, the liability is increased and a corresponding expense is recognised in profit or loss.
answered Sep 24, 2017 by anonymous