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Implementation of CICA 3855

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Modifications to be made ... Assets are valued at amortized cost or moving average market on the ... after tax unrealized losses deducted from Tier 1 capital ... – PowerPoint PPT presentation

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Title: Implementation of CICA 3855


1
Implementation of CICA 3855
  • CIA AA Seminar
  • September 21, 2006
  • By Bernard Dupont

2
Process for Updating MCSSR
  • Modifications to be made every 3 years
  • New and material requirements for risks not
    currently covered
  • Substantial modifications of existing
    requirements for risks currently covered

3
Changes for 2007
  • Made to
  • Correct errors
  • Close a material loophole
  • Provide clarifications
  • Reflect new accounting standards

4
Current MCCSR Requirements
  • Assets are valued at amortized cost or moving
    average market on the balance sheet
  • Assets supporting surplus are recognized at
    market (net of taxes) for Capital Available
    purposes
  • 55 of unrealized unamortized gains recognized in
    Tier 2C

5
Financial Instruments Guideline
  • OSFI has issued criteria for the use of the Fair
    Value Option
  • It eliminates or significantly reduces mismatch,
    or
  • A group of financial assets, financial
    liabilities or both is managed and its
    performance is evaluated on a fair value basis,
    in accordance with a documented risk management
    strategy

6
Held for Trade FVO Instruments
  • Accumulated net after tax unrealized gains/losses
    included in Tier one capital available
  • Balance sheet values used to determine capital
    required

7
AFS Loans
  • Accumulated net after tax unrealized gains/losses
    not included in capital available
  • Amortized cost used to determine capital required

8
AFS Debt and Equities
  • Accumulated net after tax unrealized losses
    deducted from Tier 1 capital
  • Accumulated net after tax unrealized gains
    included in Tier 2A capital
  • Balance sheet values used to determine capital
    required

9
Held to Maturity Instruments
  • Accumulated net after tax unrealized gains/losses
    not included in capital available
  • Balance sheet values (amortized cost) used to
    determine capital required

10
Other assets
  • No change to current accounting and capital
    treatment

11
Impact on Capital Required
  • Varies by Company
  • CALM Valuation
  • C-1 Requirement applied to
  • Balance sheet values for all financial
    instruments except AFS loans
  • Amortized cost for AFS loans
  • Transitional provisions
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