Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p84
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 84/101)
Character Range: 263572–266692

which would have cost implications.

          (d) Approach 4: No modifications to the application of AASB 17 when the activities would fall within the scope of AASB 17 based on the pre-requisites, indicators and other considerations when an entity controls the insurance activities and prepares stand-alone general purpose financial statements. However, permit a free choice for government departments to apply either AASB 17 or AASB 137 to prepare administered item information on captive insurers that do not prepare stand-alone general purpose financial statements. This would avoid governments being forced to apply different forms of accounting at the entity and consolidated levels, but not necessarily when there are stand-alone general purpose financial statements as well. This is consistent with the principle that each entity applies Standards based on its own perspective and circumstances in the context of stand-alone general purpose financial statements, but not in an administered items context.

     BC274        The AASB concluded that Approach 4 should be implemented by amending AASB 1050 for the following reasons.

          (a) The AASB considers that the decision of a jurisdiction to require an entity to prepare stand-alone general purpose financial statements when that entity, from a whole of government perspective, conducts self-insurance activities, should trigger the need to apply Accounting Standards based on that entity's perspective. As a stand-alone entity, its insurance activities[29] would not be self-insurance and, if the activities fall within the scope of AASB 17 based on the pre-requisites, indicators and other considerations, the captive insurer should apply AASB 17 in its general purpose financial statements.

          (b) It is reasonable from a cost-benefit perspective to avoid the potential for different accounting policies having to be applied in reporting administered item information in Departmental general purpose financial statements and consolidated information in Whole of Government general purpose financial statements.

          (c) Approach 4 seems consistent with the basis on which AASB 1050 was created. AASB 1050 emerged from a restructuring of Accounting Standards applicable to government entities that included withdrawing AAS 29 Financial Reporting by Government Departments, which, among other things, addressed administered item disclosure requirements. In this process, the AASB made a limited number of amendments and acknowledged inadequacies in AAS 29 are retained, including the lack of extensive guidance for identifying administered items and the potential inadequate prominence given to administered items in a complete set of financial statements – refer to paragraph BC13 of AASB 1050. The AASB noted that one possible inadequacy appears to be that the basis of accounting for administered items may differ from the basis that would be used in a government department's own financial statements in respect of controlled items – refer to paragraph BC18 of AASB 1050.

     The Boards noted that supportive feedback was received