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Old 11-21-2017, 02:59 PM
dunnigan dunnigan is offline
Join Date: Apr 2007
Posts: 135
Default Payout Annuities FAS115 Adjusment

Has anyone heard of adding an maintenance expense reserve on top of the market value recalculation of liabilities when calculating the shadow adjustment?

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Old 12-01-2017, 03:56 PM
dunnigan dunnigan is offline
Join Date: Apr 2007
Posts: 135

Perhaps a more general question will get some responses...

Would anyone care to comment on whether they are calculating shadow adjustments for certain liabilities? If so, which liabilities and how?
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Old 12-01-2017, 05:10 PM
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urysohn urysohn is offline
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Broadly, we're calculate a shadow adjustment on all our liabilities which would be impacted by an immediate drop in the earned rate of the assets backing that liability.

The adjustment is equal to the liability increase which would result if we sold all our assets, recognized the cap gains/losses, then repurchased the assets. there anything about your maintenance expense reserve which would change if you flipped all the assets? If yes, set up the shadow adjustment. If not, don't.

That's all Shadow 101, but I'm not trying to be flippant, just boiling it down to the one key factor which would address your question. I'd think the answer would be "no maint exp reserve shadow adjustment" but that could be a company-specific determination
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