Document ID: chunk:federal_register_of_legislation:F2023L00694:body:0:p18
Version: federal_register_of_legislation:F2023L00694
Segment Type: other
Provision Reference: 
Character Range: 46849–49807

company fees are unreasonable as a basis for the allocation, the life company must determine an alternative allocation applying the principles and requirements of this section on a 'look-through' basis.
107.     The information required to undertake this allocation should be sought from the service provider. Where practical difficulties arise in accessing the required information other methods, such as reference to appropriate industry benchmarks, may be employed.
Acquisition expenses
108.     Acquisition expenses are defined in terms of the activities related to the acquiring of new business. The acquisition of new business can generally be considered to include activities of the company such as product marketing, sales, underwriting and administration, undertaken prior to and at the point of issuing the policy and establishing it in the policy records of the company.
109.     The new business expected to derive from a particular expense may not necessarily be acquired in the same period in which the expense occurs. The new business must, however, be expected to arise as a result of that expenditure. To the extent the expenditure has only a tenuous link with the acquisition of new business - for example, general growth and development expenses - it is not considered to be an acquisition expense.
One-off expenses
110.     One-off expenses must be of itself:
(a)          material in accordance with the provisions of paragraphs 117 to 119;
(b)          not incurred as part of the normal ongoing operations of the company; and
(c)          not regularly recurring in nature.
111.     One-off expenses, while allocated to expense categories for financial reporting purposes, need not be explicitly allocated to expense categories, APRA product groups and subcategories for the purposes of this Prudential Standard.
Friendly societies
112.     The paragraphs 113 to 116 are relevant to a friendly society for policy liability valuation and regulatory capital calculation.
113.     For expense allocation purposes a friendly society is to be regarded as two separate companies, namely:
(a)          the management fund in isolation; and
(b)          the sum of all the benefit funds.
114.     All the expenses of the society are to be allocated to the management fund, except in certain cases when some direct costs are allocated to a benefit fund where that benefit fund rules allow this.
115.     The expenses of the benefit funds (other than certain direct costs) are represented by the fees payable to the management fund under the benefit fund rules. For the purpose of allocating those expenses to the relevant expense categories in accordance with paragraph 98, the provisions under paragraphs 106 to 107 in relation to service agreements are applicable.
116.     Where an allocation of the expenses of the management fund relating to life insurance activities into expense categories is not undertaken, acquisition expenses must be