Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p95
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 95/101)
Character Range: 294557–297552

superseded AASB 1023/AASB 4 and concluded that these matters, at this stage, should be addressed through liaison between the AASB and the Australian Bureau of Statistics, rather than by modifying AASB 17. The AASB noted that a number of other potential issues also need to be discussed with the Australian Bureau of Statistics, including the AASB 17 classification of the impacts of: (i) changes in discount rates and inflation rates; and (ii) the unwinding of discounting and inflating cash flows, as a separate item 'insurance finance income or expenses'.

Audit and assurance matters

     BC326        Some respondents identified a range of audit and assurance challenges under the AASB ED 319 proposals relating to the scope of AASB 17 that could increase audit and client costs including:

          (a) significant audit resources will be required to make judgments about which arrangements should be subject to the assessment process and to make the assessments based on the indicators;

          (b) a lack of clarity on the essence/focus of an insurance contract will be an audit challenge, including how coverage periods are intended to be determined where there is no contract;

          (c) any arrangements currently accounted for under AASB 137 that need to migrate to AASB 17 will pose a challenge since the proposals in their current form have not been tested; and

          (d) applying the notion that risk adjustments are based on compensation sought for bearing risk.

     BC327        The AASB noted that applying any new Accounting Standard would require an entity to incur costs and effort to ensure the new requirements are applied appropriately and concluded that each of the above matters, to some extent, are at least mitigated, based on the following:

          (a) the Boards' decisions to identify two pre-requisites, two indicators and two other considerations and explain how they are applied should help to ease the auditing challenges around determining which arrangements fall within the scope of AASB 17;

          (b) the range of public sector modifications to AASB 17 should help minimise the costs of transitioning from AASB 1023/AASB 4 and, if relevant, from AASB 137; and

          (c) further reasoning is included in the Basis for Conclusions on risk adjustments.

Cost-benefit considerations

     BC328        Disparate views were expressed by some respondents in response to AASB ED 319 on the following matters that relate to whether the application of AASB 17 to the public sector is cost-beneficial:

          (a) the usefulness of the information that would be produced by public sector entities applying AASB 17;

          (b) 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