Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p85
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 85/101)
Character Range: 266439–269396

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 for Approach 4, which was included in the Draft Standard of the amendments to AASB 17/PBE IFRS 17 (and, in the case of the AASB only, AASB 1050 Administered Items) issued in October 2022 for fatal flaw comment.

     BC275        The AASB noted that the decision to take Approach 4 in this project, including permitting a choice of Standard to apply to determine administered item disclosures, should not be viewed as setting a precedent for how any future AASB work on administered item disclosures might evolve.

Other modifications considered but not included

Discounting and inflating

     BC276        Based on public sector arrangements that seem likely to fall within the scope of AASB 17/PBE IFRS 17 and the Boards' proposals on contract boundaries and coverage periods (modifications to paragraphs 34 and B64/AG64), the Boards noted that:

          (a) most coverage periods are one year or less; and

          (b) levies/premiums are typically received either shortly before coverage commences or early in the coverage period.

     BC277        Accordingly, the Boards observed that the discounting requirements in AASB 17/PBE IFRS 17 (such as in AASB 17/PBE IFRS 17.36 and 56):

          (a) would not be expected to be relevant in measuring levies/premiums and in measuring most liabilities for remaining coverage;

          (b) might be relevant in the unlikely event that the general measurement model would need to be applied to measure liabilities for remaining coverage for arrangements that provide multi-year coverage.

     BC278        However, the Boards observed that public sector arrangements which seem likely to fall within the scope of AASB 17/PBE IFRS 17 often involve claims that are settled over long periods – sometimes many decades – and that discounting and inflating is usually an important aspect of measuring liabilities for incurred claims.

     BC279        The Boards noted that, under AASB 1023/PBE IFRS 4, expected future cash flows are:

          (a) discounted for the time value of money at a risk-free rate based on current observable, objective rates that relate to the nature, structure and term of the future obligations;

          (b) may need to be inflated because the ultimate cost of settlement will be affected by inflationary factors likely to occur during the period to settlement; and

          (c) not expected to be either discounted or inflated when they are settled within a year.

     BC280        The Boards noted that, under AASB 17/PBE IFRS 17, essentially the same notions of discounting and inflating cash flows apply, but that the discount rate relates to a current time value of money and the liquidity characteristics of