GROUP ACCOUNTING POLICIES (continued) 5. Insurance, investment and reinsurance contracts (continued) 5.1.4 Subsequent measurement For insurance contracts under the GMM, the following adjustments do not adjust the CSM: a) changes in the FCF for the effect of the time value of money and the effect of financial risk and changes thereof; b) changes in the FCF relating to the LIC; c) experience adjustments – arising from premiums received in the period that do not relate to future service and related cash flows, such as insurance acquisition cash flows and premium-based taxes; and d) experience adjustments relating to insurance service expenses (excluding insurance acquisition cash flows). Changes to the contractual service margin For insurance contracts issued, at the end of each reporting period the carrying amount of the CSM is adjusted by the Group to reflect the effect of the following changes: a) The effect of any new contracts added to the group. b) For contracts measured under the GMM, interest accreted on the carrying amount of the CSM. c) Changes in the FCF relating to future service are recognised by adjusting the CSM. Changes in the FCF are recognised in the CSM to the extent that the CSM is available. When an increase in the FCF exceeds the carrying amount of the CSM, the CSM is reduced to zero, the excess is recognised in insurance service expenses and a loss component is recognised within the LRC. d) The effect of any currency exchange differences. e) The amount recognised as insurance revenue for insurance contract services provided during the period, determined after all other adjustments above. For reinsurance contracts held, at the end of each reporting period, the carrying amount of the CSM is adjusted by the Group to reflect the effect of the following changes: a) The effect of any new contracts added to the group. b) Interest accreted on the carrying amount of the CSM. c) Income recognised in profit or loss when the entity recognises a loss on initial recognition of an onerous group of underlying insurance contracts or on addition of onerous underlying insurance contracts to that group. A loss- recovery component is established or adjusted within the remaining coverage for reinsurance contracts held for the amount of income recognised. d) Reversals of a loss-recovery component other than changes in the FCF of reinsurance contracts held. e) Changes in the FCF, to the extent that the change relates to future service, unless the change results from a change in FCF allocated to a group of underlying insurance contracts that does not adjust the CSM for the group of underlying insurance contracts. f) The effect of any currency exchange differences. g) The amount recognised in profit or loss for insurance contract services received during the period, determined after all other adjustments above. Release of the CSM to profit or loss The amount of the CSM recognised in profit or loss for insurance contract services in the period is determined by the allocation of the CSM remaining at the end of the reporting period over the current and remaining expected coverage period of the group of insurance contracts based on coverage units. The coverage period is defined as a period during which the entity provides insurance contract services. Insurance contract services include coverage for an insured event (insurance coverage), the generation of an investment return for the policyholder, if applicable (investment-return service) for the contracts under the GMM, and the management of underlying items on behalf of the policyholder (investment-related service) for the contracts under the VFA. 121 Group Accounting Policies
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