Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p96
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 96/101)
Character Range: 297246–300429

greater consistency of accounting that could be achieved across entities;

          (c) costs associated with applying the indicators for determining whether an arrangement falls within the scope of AASB 17;

          (d) costs associated with liability measurement, including for actuarial services; and

          (e) costs associated with determining eligibility for the premium allocation approach and/or the costs of applying the general measurement model to determine liabilities for remaining coverage.

     BC329        The AASB concluded that acting on the matters raised would change the objective of the project and that the public sector modifications made to AASB 17 either fully address or substantially mitigate the concerns expressed, based on the following:

          (a) the Boards' decisions on identifying two pre-requisites, two indicators and two other considerations and explaining how they are applied should help to reduce the costs of determining when arrangements fall within the scope of AASB 17, and this would be expected to be a 'one-time' determination; and

          (b) providing public sector entities with an accounting policy choice to apply the premium allocation approach.

Implications for AASB 4, AASB 1023 and AASB 1038

     BC330        The AASB noted that adopting IFRS 17 would supersede the following Standards and, therefore, change current accounting requirements for insurance contracts:

          (a) AASB 4 Insurance Contracts;

          (b) AASB 1023 General Insurance Contracts; and

          (c) AASB 1038 Life Insurance Contracts.

     BC331        The AASB acknowledged that doing so would improve financial reporting in some respects but not in other respects.

     BC332        Regarding the key aspects, the AASB noted that:
(a) the main improvements include:
(i) greater clarity around the accounting for acquisition costs, particularly for general insurance; and
(ii) greater alignment with other industries of the basis for revenue recognition for insurance contracts with coverage periods greater than one year; and
(b) the main areas of concern include:
(i) use of historical (inception-date) discount rates in accounting for the contractual service margin under the general measurement model;
(ii) use of 'coverage period' (rather than pattern of service provision) as the basis for recognising the contractual service margin in profit over the contract life; and
(iii) the level of aggregation of contracts for accounting purposes.

     BC333        In weighing up these issues, the AASB also acknowledged the precedent it established when it decided not to adopt IAS 26 Accounting and Reporting by Retirement Benefit Plans in favour of retaining the Australian accounting requirements specified in AAS 25 Financial Reporting by Superannuation Plans. This decision was subsequently reconfirmed when the AASB issued AASB 1056 Superannuation Entities to supersede AAS 25.

     BC334        In considering the facts and circumstances surrounding the AASB's decisions not to adopt IAS 26 (and thereby have an exception to its IFRS adoption policy), the AASB concluded that the legislative environment as well