September status of the IASB/ FASB insurance contracts project

September status
of the IASB/
FASB insurance
contracts project

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Both the IASB and the FASB have been debating the accounting for insurance
To date, the FASB
contracts this year. Their timetable is to issue an exposure draft of new
accounting guidance for insurance contracts in December 2009.
and IASB have
each discussed
Measurement approaches for the liability
various potential
A starting point for the discussions has been the IASB Discussion Paper (DP)
measurement
issued in May 2007 which proposed a single model for al insurance and
reinsurance contracts, a current exit value approach based on the notion of
approaches for
what it would cost to transfer the insurance contracts to another party. As
insurance contracts,
transfers rarely actually happen, the DP proposed a “building block approach”
which consists of the following three basic elements and uses market inputs
but neither has
for all assumptions:
agreed with the
• Current estimate of the expected (i.e., probability weighted) future
current exit value
cash flows
approach as
• Time value of money
described in the
• A margin
IASB’s May 2007
To date, the FASB and IASB have each discussed various potential measure-
Discussion Paper.
ment approaches for insurance contracts, but neither has agreed with the
current exit value approach as described in the DP. So far they have settled
on two possible approaches:
• Current fulfillment value
• Measurement approach based on an updated IAS 37 model
Both of these approaches have the same three building blocks as their
foundation. However, depending on how each of these components of the
building block approach is measured (i.e., the inputs used and their objective),
the valuations can differ significantly. The current fulfillment value approach
favored by the FASB is the insurer-specific expected present value of the
cost of fulfil ing the obligation to policyholders with a “composite margin”,
calculated as the Day 1 difference between the expected present value of
this cost and the present value of expected premiums. The IAS 37 proposed
model, currently favored by a slight majority of the IASB, includes an explicit
risk margin and a service margin in addition to a residual margin in its building
block measurement. In addition, the IAS 37 proposed model explicitly requires
using the lowest of the building block amount, the price that the market would
demand to assume the liability (an exit value notion), if available; and the price
that the counterparty would demand to cancel the liability, if cancellation is
possible (a settlement notion).


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At the July 2009 joint meeting, the FASB expressed
the Board to reconsider its tentative conclusion if the
support for the current fulfil ment value approach. In its
proposed IAS 37 model changes.
deliberations, the FASB noted that since most insurance
liabilities will not be transferred to a third party, the
Given the close IASB vote, in which eight of the fifteen
measurement objective should be based on what is
Board members voted to use the updated IAS 37 model
expected to happen (i.e., fulfillment of the insurer’s
in the insurance contracts project, and the fact that the
obligations over time to the policyholder). In addition,
FASB supports the fulfillment value model, the IASB
the FASB is concerned that estimating an explicit risk
would include discussion of both models in the IASB
margin may not be a reliable measure, adds unnecessary
exposure draft scheduled to be available for comment
conservativism, reduces comparability and complicates
in December.
the calculation of the liability, adding additional subjectivity
on top of what is already a subjective estimate.
The IASB also has expressed support for requiring an
unearned premium approach for pre-claims liabilities of
At its September 18 meeting, the IASB decided by a
short duration contracts. This is based on their belief that
narrow majority to use the updated IAS 37 model (with
it is a good approximation - at least for the short-term
explicit margins) rather than the current fulfillment model
pre-claim period - of the two models proposed, which
favored by the FASB. Those supporting this approach
are more complex in application. The unearned premium
noted that the use of the updated IAS 37 model for
approach also provides consistency of application for
insurance contracts would provide consistency with the
short duration contracts. This approach would recognize
measurement approach used for non-financial liabilities
unearned premium over the coverage period in the place
for all companies. However, a number of Board members
of the three building block approach, similar to current
expressed support for the current fulfil ment model
accounting for unearned premiums during the pre-claim
because (1) they believe it is more consistent with the
period, but would use the three building block approach
conclusions of the revenue recognition project, (2) it
for the unpaid claims portion of the liability. The FASB
avoids the difficultly of distinguishing between the risk
will discuss an unearned premium approach at a
and profit margins, and (3) it will achieve convergence
future meeting.
with the FASB. It was also noted that the updated IAS 37
approach was not yet fully developed, which may cause
IAS 37 model
IAS 37 v Fulfilment Model
• Amount the entity would rational y pay at reporting date to
Arguments for IAS 37
Arguments for fulfilment
be relieved of obligation
• Consistency with other
• Consistent with how insurers conduct
uncertain liabilities
their business
• Lowest of:
• Measurement objective
• Al ows boards to tailor the measurements
- Not having to fulfil obligation
more rigorous
objective to reflect specific characteristics
of insurance contracts
- Market price
• Provides a basis for risk
• Wil exclude risk and service margins
- Cancel ation price with counterparty
and service margins
which add complexity and can only be
• Explicit risk margin remeasured
determined in an arbitrary way
• Service margin remeasured

September status of the IASB/FASB insurance contracts project
3

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Day 1 Profit
Both the FASB and
Both the FASB and the IASB believe that there should be no Day 1 profit
recognition for insurance contracts, supporting their view principal y by
the IASB believe
analogy to the FASB/IASB joint project on revenue recognition. The revenue
that there should
recognition project does not al ow Day 1 revenue recognition, noting that
revenue should only be recognized as an entity satisfies its performance
be no Day 1 profit
obligation to its customer. The signing of a contract is not deemed to provide
recognition for
any service or benefit to the policyholder. This is a change from the DP which
proposed that Day 1 profit be recognized. The IASB was then under the
insurance contracts.
impression such a profit would usually be small.
There is currently a difference between the two Boards’ views on how to
calculate the “no Day 1 profit” amount. Both Boards view acquisition costs
as past incurred costs and not a part of the future costs incorporated in
the liability estimate for any of the proposed measurement approaches
and, therefore, believe they should be expensed as incurred. The FASB, in
accordance with the principles of the revenue recognition project, would not
include these past costs in the “no Day 1 profit” calculation, thus potentially
resulting in a loss in the income statement when a contract is sold equal to
the acquisition costs. This difference would be a major change for insurance
companies that have large costs of selling and large deferred acquisition
cost assets on their books currently. The IASB recognizes that insurance
companies include recovery of acquisition costs in their pricing, and believes
that the premium related to recovery of direct incremental acquisition costs
(primarily commissions) should be recognized in the “no Day 1 profit”
calculation, with revenue recognized to offset these acquisition costs.
These incremental costs would be expected to be less than the amount of
acquisition costs capitalized under current US GAAP practice. The IASB has
tentatively concluded that a loss making contract would result in recognition
of a loss on Day 1, and although the FASB not yet discussed this issue,
observers expect that it will reach the same conclusion.
Probability weighted expected cash flows
With respect to the first “building block,” the current estimate of expected
probability weighted future cash flows, the FASB and IASB appear to be
aligned in their views. Both believe the estimate should be updated each
reporting period, and, in theory, based on probability weighted cash flows
(a “mean” or average) that reflect the full range of possible outcomes, rather
than a single point estimate of the most likely amount to be incurred (i.e., in
US GAAP literature, a “best estimate”). The Boards believe that expected
cash flows best reflect the inherent uncertainty in the amount and timing of
cash flows and provide the most meaningful representation of an insurance
contract and its potential numerous possible outcomes. The summaries to
date from the FASB and IASB staff point out that this approach in some cases
could require relatively simple modeling, without the need for a large number
of detailed simulations, but in other cases could involve more complex
calculations and the use of stochastic modeling.


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There remains an implementation issue as to whether current claims reserving
practices, which involve developing an actuarial central estimate, will meet
Both the IASB
the requirement of this principle. Informal discussions with the IASB staff
have indicated that the objectives of the proposed approach and US current
and FASB believe
practice for property and casualty claims reserves are the same.
the estimate
With respect to the inputs used to measure the probability weighted cash
of expected
flows, the FASB and IASB discussions have focused on whether and when
probability weighted
market inputs versus entity-specific inputs should be used. Comments from
constituents on the DP focused on the impracticality of obtaining “market
future cash flows
inputs” for some of the required assumptions in the building block approach.
should be updated
Both Boards seem to agree that where observable market inputs are available
and are both relevant and reliable, such as for certain financial variables (e.g.,
each reporting
interest rates, equity prices, and inflation) observable market inputs should be
period, and, in
used. For the estimation of cash flows relating to insurance claims and related
costs, the DP argued that in practice, market participant cash flows such as
theory, based on
those relating to underlying insurance claims would not differ significantly from
probability weighted
entity-specific cash flows. While most respondents accepted this argument,
some disagreed with using expense data of a market participant rather than
cash flows that
entity-specific expenses. Preparers generally thought entity-specific estimates
reflect the full
of such costs were more appropriate and they were concerned with their
ability to obtain sufficient evidence to satisfy auditors and regulators that an
range of possible
entity’s expected expenses were in line with a market participant’s view of
outcomes, rather
these expenses.
than a single point
The FASB noted that it believes entity-specific data, such as historical data
estimate of the
on an entity’s own administrative and claims processing costs, could be used,
but also commented that if there is specific market information available
most likely amount
relative to a factor that an entity is estimating, then such market data cannot
to be incurred.
be ignored. The IASB has been less clear in its discussions, referring to the
belief expressed in the DP that entity-specific inputs would not typically differ
significantly from market participant inputs for non-financial variables. The
IASB staff papers have noted that both the IAS 37 proposed model and the
current fulfillment value model measure the liability from the perspective of
the insurer and not from the perspective of other market participants, implying
an entity-specific based measure. While the IAS 37 approach starts out as
a transfer sort of notion, requiring a liability based on “the amount the entity
would rationally pay at the end of the reporting period to be relieved of its
present obligation”, there is an entity-specific measurement to the calculation
that comes into play. That is because the amount the entity would rationally
pay is further defined as the lowest of (1) the value to the entity of not having
to fulfill the liability (an entity-specific measure), (2) the price that the market
would demand to assume the liability (an exit value notion); and (3) the price
that the counterparty would demand to cancel the liability, if cancellation is
possible (a settlement notion). The IASB acknowledges that insurers typically
fulfill their insurance liabilities rather than transferring or settling them;
accordingly, in many (if not most) cases, it is expected that an entity-specific
value would be used. At the same time, the proposed IASB approach would
specifically take into account transfer or settlement amounts where there is
objective evidence of such amounts.

September status of the IASB/FASB insurance contracts project
5

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Policyholder behavior and contract boundaries
The IASB and
This concerns whether or not future “recurring” or “renewal” premiums on
FASB have been
existing contracts should be included in the measurement of the contract
liability, and, if so, whether or not an asset could result at an individual
discussing whether
contract or portfolio of contracts level. An essential consideration is where
or not future
the existing contract ends and a new contract begins. For example, in a
typical long duration life insurance contract, the policyholder has the option
“recurring” or
to keep paying renewal premiums at terms that are typically specified in the
“renewal” premiums
original contract, but is not obligated to do so. In contrast, a typical short
duration property casualty contract may also include an option to renew,
on existing
but the renewal premium may be at then current rates rather than at a rate
contracts should
specified in the contract.
be included in the
The FASB has had an educational session on this topic but no formal Board
measurement of
discussions. In the educational session discussions, some Board members
seemed willing to support the inclusion of future expected premium cash
the contract liability,
flows (and related benefits and claims) for existing contracts, but noted that
and, if so, whether
a boundary needed to be established as to what constituted an existing
contract versus a new contract. That boundary seemed to be when an insurer
or not an asset
could unconditionally reunderwrite or reprice the contract. One stumbling
could result at an
block in this model is that the insurer has in substance written an option.
Elsewhere in the literature, the conclusion is that written options cannot
individual contract
be assets.
or portfolio of
The IASB has had some preliminary discussions on the premiums to be
contracts level.
included in expected cash flow estimates, noting that the measurement should
include future premiums and other cash flows resulting from those premiums
(e.g., benefits and claims, including those cash flows whose amount or timing
depends on whether policyholders exercise options in the contracts). Similar
to the FASB’s preliminary thoughts, to identify the boundary between existing
contracts and new contracts, the starting point would be to consider whether
the insurer can cancel the contract or change the pricing or other terms. The
IASB staff has indicated that they wil develop more specific proposals relating
to this issue for presentation to the Board at a future meeting.
Another related issue is whether the conclusions reached apply to situations
in which the amount of premiums has not been indicated in the contract (e.g.,
in universal life contracts). This will also be discussed at a future meeting.


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Discounting
Both Boards have tentatively concluded that cash flows should be dis-
Both The IASB
counted, including claim liabilities arising from non-life contracts. The
and FASB Boards
IASB has rejected non-discounting as a proxy for the risk margin, which is
the current practice in most, but not all, property and casualty insurance
have tentatively
jurisdictions. The FASB will discuss non-discounting as a proxy for a risk
concluded that
margin at a future meeting.
cash flows should
The DP noted that the discount rate should be consistent with observable
be discounted,
current market prices for cash flows whose characteristics match those of the
insurance liability, in terms of timing, currency and liquidity. The DP rejected
including claim
use of a discount rate based on the assets held to back insurance liabilities
liabilities arising
as irrelevant for a decision useful measurement of that liability unless the cash
flows from those assets directly affect the cash flows arising from that liability.
from non-life
contracts.
The IASB recently discussed whether guidance should be based on:
• A principles-based approach in which the discount rate would reflect the
characteristics of the liability, or
• A practical approach aimed at reducing complexity and fostering
comparability by prescribing an observable market rate such as
that used in pension or other accounting guidance.
A principles-based approach might result in the use of a risk free rate,
adjusted for liquidity if the risk free rate is based on government securities
with different liquidity characteristics than insurance contracts. A practical
approach might result in the use of a rate for high quality fixed income
debt instruments, as is used in some other accounting guidance. The IASB
will discuss the separate topic of including an adjustment to the rate for a
company’s own non-performance risk as part of its fair value project.
The IASB has tentatively agreed that the exposure draft should state the
principle of a discount rate, i.e., that it reflects the characteristics of the
liability, rather than prescribe an observable market rate. The IASB staff
noted that the discount rate should reflect only the time value of money, not
other risks inherent in the cash flows that would be captured in the other
two building blocks. The discussion on the components of the potential
discount rate included mention of the risk-free rate, a liquidity premium for an
illiquid non-puttable liability such as a payout annuity (versus a highly liquid
government security), and own performance risk (for which discussion was
deferred in light of the overall fair value project). The IASB discussed the fact
that there was a concern among constituents that significant Day 1 losses
could arise if the risk free rate alone were used for certain contracts where
the liabilities are illiquid (such as annuity contracts). An upward adjustment
from the risk free rate on liquid government securities would theoretical y
be required in such circumstances The IASB wil be seeking further input
from companies involved in the field testing as to whether they can reliably
estimate a liquidity adjustment.

September status of the IASB/FASB insurance contracts project
7

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Possible measurement approaches being discussed
The difference in views
between the IASB and
1. Updated IAS 37 model
Co
C m
o po
p si
s te
t Ma
M rg
r i
g n
with explicit risk margin
Re
R si
s du
d al
a Ma
M rg
r i
g n
FASB Boards on the liability
Serv
r i
v ce
c Ma
M rg
r i
g n
2. Fulfil ment margin with
Ri
R sk
s
k Ma
M rg
r i
g n
measurement objective is
one margin calibrated
Ca
C sh
s Fl
F ow
to premium
most pronounced concerning
risk margins.
Candidate 1
Candidate 2
The FASB has not reached any decisions regarding the
as the difference between the expected present value of
selection of the discount rate, but has had one education
premiums, less the expected present value of the cost
session where the staff introduced the two IASB choices
of fulfilling the obligation to the policy holder over time.
noted above (principle-based rate versus prescribed
This composite margin would not be remeasured and
rate). The staff currently supports the practical approach
would be released as described below. There would be
of prescribing a rate, such as the rate for high quality
no explicit, separately calculated risk margin, as the FASB
fixed income debt instruments. They noted that use of a
believes that the objective of the fulfillment approach
prescribed rate is similar to other accounting guidance,
is to measure the cost of fulfilling an obligation rather
such as pensions, and believe that the fulfillment value
than to measure the amount at which the liability could
has a similar objective to a pension measurement. Use
be transferred. In addition, the FASB is concerned that
of a prescribed rate would also provide comparability
estimating an explicit risk margin may not be a reliable
among companies. Formal Board discussion is expected
measure, adds unnecessary conservativism, reduces
on this topic next week. Initial comments from the
comparability and complicates the calculation of the
Board did not reveal a leaning in any particular direction.
liability, adding additional subjectivity to what is already
While there was acknowledgement of the benefits of a
a subjective estimate.
practical approach, including comparability, relative ease
of estimation, and lack of subjectivity, there was also
In contrast, under the updated IAS 37 measurement
concern about the lack of an objective or principle in such approach, the “residual margin” would be the amount
a rate, and the potential disconnect with the economics of calculated on Day 1 as the difference between the
the insurance transaction.
expected present value of premiums, less the expected
present value of the cost of fulfilling the obligation to the
Margins
policyholder over time, less an explicit risk and service
margin. The explicit risk margin would reflect the value
The difference in views between the Boards on the liability to the entity of not having to bear the risk related to the
measurement objective is most pronounced in the risk
expected cash flows and would be remeasured at each
margin building block.
reporting date. Those supporting inclusion of an explicit
risk margin in the estimate note that it is necessary
Under the current fulfillment value approach supported
to reflect the fact that an insurer would rationally pay
by the FASB, a “composite margin” would constitute the
different amounts to be relieved of two liabilities that
third building block, calculated by deduction on Day 1
differ in riskiness but otherwise have the same probability


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weighted cash flows. As an example, inclusion of a risk
several alternatives that could drive the pattern, which
margin appropriately distinguishes a liability with a 50%
included release from risk, passage of time, and cash
probability of requiring cash outflows of $49 and a 50%
flows. The Board has not reached a conclusion as to
probability of requiring cash outflows of $51 from a
whether it should (1) prescribe the driver (e.g., passage of
second liability with a 50% probability of requiring cash
time), or (2) allow each company to select the appropriate
outflows of $0 and a 50% probability of requiring cash
driver. The staff wil provide further input at a subsequent
outflows of $100. Both of these liabilities have the same
meeting, including input from companies participating in
probability weighted cash flows of $50 but the second
the field testing.
liability is considered to be riskier than the first.
An additional issue requiring consideration is how to
Both models require consideration of how the margin
account for subsequent changes in estimates in cash
deferred on Day 1 should be released and over what
flows for building block one, i.e., whether changes in
period, i.e., the recognition pattern and its term. For
estimate should result in the adjustment of the composite
short duration policies, the period of release could be
or residual margin amounts. The IASB discussed two
just the coverage period (generally one year) or could
principal approaches. Approach A would recognize
extend through the claims handling period, which in long
any changes immediately in the income statement with
tail business could be much longer. For long duration
the residual margin locked in at inception. Approach B
contracts, the coverage period and claims handling period
would adjust the residual margin for subsequent changes
typically are about the same, so that the decision about the in estimate, with the change in estimate reflected in
term of release is not as critical.
income as the revised residual margin is amortized over
the remaining period. Most Board members concluded
Under the fulfillment value approach, the composite
that Approach A was consistent with an IAS 37 model
margin is comprised of an implicit, unmeasured risk
and Approach B was more consistent with a fulfillment
and service margin and a residual margin, representing
model. Eleven Board members voted in favor of Approach
any residual profit resulting from the Day 1 deferral of
A (recognizing any changes immediately in the income
expected gain. Because it implicitly includes a risk
statement) under the IAS 37 model. The FASB will discuss
margin, some argue that the composite margin should
this issue at a future meeting.
be amortized based on the expected expiration of risk.
In contrast, under the IAS 37 proposal, an explicit risk
margin is already being estimated and updated each
Now until December
period; the residual margin represents only residual
In addition, to the specific issues discussed here, the
expected profit from the transaction that would otherwise
Boards have yet to discuss or conclude on policyholder
have been recognized immediately if not for the Day
behavior and the contract boundaries, unbundling (whether
1 profit deferral. Therefore, to some, release from risk
premium should be broken down into its insurance,
seems irrelevant for the unwinding of any residual margin, service, asset management and financing components),
while others still look to release from risk as the most
financial statement presentation, participating and unit
relevant driver.
linked (variable) contracts and disclosures, including
sensitivities, among other topics. This all adds up to a very
The FASB has yet to discuss the subsequent release of
full fall agenda for the Boards and their staff. Other major
the composite margin. Under the IAS 37 model, a slim
Board projects, such as financial instruments, leases,
majority of the IASB voted at the September meeting that
revenue recognition, liabilities and equity and non-financial
the residual margin should be released over the coverage
liabilities include topics that may be relevant to the
period. In terms of pattern of release, the IASB discussed
insurance contracts project.

September status of the IASB/FASB insurance contracts project
9

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Potential impacts on insurers’ financial results
an explicit risk margin under the IAS 37 model that
changes with the price and perception of risk also
At this stage in the Boards’ deliberations it is hard to
will cause volatility. Those life insurance contracts
say with any certainty how insurance company financial
with a heavy investment element may experience
results will change. A few observations can be made:
reduced earlier reported profitability, as a result of
• With the restriction against Day 1 gains and the
the lower discount rates that will be applied. Those
expensing of acquisition costs, growing blocks of
lines of business that utilize the accumulated account
business will be less profitable even if the IASB view
balance for the policyholder liability will now need
about recognizing revenue for direct incremental costs
to model prospective cash flows with potentially
prevails. The effect of non-deferral or less deferral
greater volatility.
of acquisition costs will also make stable and declining • The short duration model will most likely extend the
blocks more profitable without the DAC amortization
period profit is recognized as both Boards believe there
drag, and, will eliminate the confusing unlocking
is some performance obligation or service performed
results for long duration contracts that we have today
past the end of coverage; however, during the claims
under USGAAP.
period, it may depend on the relative effect of the
• With both Boards’ leaning toward full unlocking of
discounting process and margins held. The fulfil ment
assumptions, the life insurance industry following
model would recognize this by amortizing some portion
USGAAP will have much more volatile results. The
of the composite margin over the claims settlement
interest rate volatility may be offset to some degree
period. The IAS 37 model would accomplish this
if matching assets are also marked to market
through the explicit margin in the claims liability. Highly
through the income statement but investment credit,
uncertain claims reserves wil be larger, longer tail stable
policyholder behavior and the other assumptions
reserves may be smal er. Mismatches in asset and
may still create earnings volatility. The inclusion of
liability durations wil cause interest rate volatility.
Tentative decisions from 2009 meetings to date
The remaining big issues
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c t ime
m
e va
v l
a ue
u
e of
o m
o
m n
o e
n y
o
ey
• Acquisition costs
• Re
R f
e lec
e t
c t ime
m
e va
v l
a ue
u
e of
o m
o
m n
o e
n y
• Inc
n lud
u e
d
e an
a
n e
x
e p
x l
p icit tm
a
m r
a g
r i
g n
e
in
• Unbundling
Mar
a gi
g n
n at
a t
• No
N
o da
d y
a
y 1
1 g
a
g i
a n
n re
r c
e og
o n
g i
n se
s d
e
d (e
( x
e c
x ep
e t
p f o
f r
o rac
a qu
q i
u sition
o
n c
os
o t
s s)
s ) • No
N
o da
d y
a
y 1
1 g
a
g i
a n
inc
n e
c p
e t
p iton
o
• Da
D y
a
y 1
1 los
o s
s in
n inc
n o
c m
o e
m
e s
t
s at
a em
e e
m n
e t
n
• No
N t
o ye
y t
e tdi
d sc
s us
u se
s d
e
d da
d y
a
y 1
1 los
o s
s
• Performance statement structure
Mar
a gi
g ns
n
• Vi
V ew
e s
w di
d ve
v r
e g
r e
g
• Re
R c
e og
o n
g i
n se
e co
c m
o p
m o
p s
o ite
e ma
m r
a g
r i
g n
n
ra
r t
a he
h r
e rth
t a
h n
a
n e
x
e p
x l
p icit trirsk
k ma
m r
a g
r i
g n
Ac
A qu
q i
u si
s titon
o
n
• Re
R c
e og
o n
g i
n se
e as
a
s re
r v
e e
v n
e u
n e
u
e pr
p e
r m
e i
m um
u
m th
t a
h t
a tco
c v
o e
v r
e s
r
• Ex
E p
x e
p n
e s
n e
e al
a lac
a qu
q i
u sition
o
n c
os
o t
s s
s
co
c s
o t
s s
t
ac
a q
c u
q i
u sition
o
n co
c s
o t
s s
t
as
a
s inc
n ur
u r
r e
r d
e
• Ac
A qu
q i
u sition
o
n cos
o t
s s
s limi
m ted
e
d t o
o inc
n r
c e
r m
e e
m n
e t
n al
a co
c s
o t
s s
t
s of
o
• No
N
o re
r c
e o
c g
o n
g i
n tion
o
n of
o fre
r v
e e
v n
e u
n e
u
e t o
o
issu
s i
u ng
n
g c
on
o t
n rta
r c
a t
c s
of
o ffs
f et
e a
c
a q
c u
q i
u sition
o
n c
os
o ts
t
Po
P l
o icyh
y o
h l
o de
d r
e r
• Inc
n lud
u e
d
e ca
c s
a h
s
h flow
o s
w w
h
w o
h s
o e
e a
m
a o
m u
o n
u t
n o
r
o rt imi
m ng
n
g de
d p
e e
p n
e d
n s
d
s
• No
N t
o ye
y t
e tdi
d sc
s us
u se
s d
e
be
b h
e a
h v
a i
v ou
o r
u ran
a d
n
d
on
o
n wh
w e
h t
e he
h r
e rpo
p l
o icyh
y o
h l
o de
d r
e s
r
s ex
e e
x r
e c
r ise
s
e o
p
o t
p ion
o s
n in
n c
on
o t
n ra
r c
a t
c s
co
c n
o t
n r
t a
r c
a t
c t
• De
D t
e ai
a led
e
d pr
p o
r p
o o
p s
o a
s l
a s
s t o
o be
b
e d
e
d v
e e
v l
e op
o e
p d
e
d ba
b s
a ed
e
d o
n
o
n wh
w e
h t
e he
h r
e r
bo
b u
o n
u d
n a
d r
a ires
e
ins
n ur
u e
r r
e rca
c n
a
n ca
c n
a c
n el
e o
r
o rch
c a
h n
a g
n e
g
e t er
e m
r s
m
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© 2009 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. This document is for general information purposes only, and
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