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Sept 22 Q2 ii)

A

Actuary@22

Ton up Member
Hi

In Sept 22 Q2 ii) Why does the examiner report say that cost of smoothing isnt allowed in this approach?

Isnt cost of smoothing alreading deduced from Asset share so implicitally it is already included in this BEL=AS+COG approach.

Please explain.
 
Hi
Actuary@22 said:
Isnt cost of smoothing alreading deduced from Asset share.
Click to expand...
No. There's a distinction to be made here: if (as is likely) there are smoothing-related deductions from asset share than these are 'charges in respect of the cost of smoothing'. That's something different from 'the cost of smoothing'. It's important to keep the ideas of charges and actual costs distinct.

The company will incur (and will need to include in its liabilities) the cost of smoothing. How it meets that cost (eg from the estate, by making charge deductions from asset shares) is up to the company (subject to TCF, whatever it's said in various policy documents etc).
 
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