Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p60
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 60/101)
Character Range: 196943–199940

observed that: AASB 15/NZ IFRS 15 and AASB 16/NZ IFRS 16 Leases provide clear definitions and descriptions of contracts that can be used as a bright line.

          (c) For some types of risks (such as workers' compensation coverage), the existence of documentation that includes substantive information about risks and benefits (well beyond the detail in any relevant enabling legislation or regulations), is an indication of an insurance contract.

     BC183        The Boards noted that, under AASB 17/PBE IFRS 17, the description of the rights and obligations that would be accounted for under insurance contracts is broad (and go beyond the contract). AASB 17/PBE IFRS 17.2 says (emphasis added):
2 An entity shall consider its substantive rights and obligations, whether they arise from a contract, law or regulation, when applying IFRS 17. A contract is an agreement between two or more parties that creates enforceable rights and obligations[[22]]. Enforceability of the rights and obligations in a contract is a matter of law. Contracts can be written, oral or implied by an entity's customary business practices. Contractual terms include all terms in a contract, explicit or implied, but an entity shall disregard terms that have no commercial substance (ie no discernible effect on the economics of the contract). Implied terms in a contract include those imposed by law or regulation. The practices and processes for establishing contracts with customers vary across legal jurisdictions, industries and entities. In addition, they may vary within an entity (for example, they may depend on the class of customer or the nature of the promised goods or services).

     BC184        Stakeholders have requested the Boards to clarify whether an arrangement where a public sector entity is required by statue or other regulation alone, without separate documentation evidencing agreements directly with participants, could indicate a contract exists for the purposes of AASB 17/PBE IFRS 17. The Boards observed, for arrangements that would be accounted for as insurance contracts, it would generally be expected that some form of documentation, in addition to statutory requirements, would exist to evidence rights and obligations of participants and the relevant public sector entity. However, the Boards considered that there may be circumstances in which there is only limited documentation in addition to statutory requirements, and that limited documentation, within the statutory environment, could still be regarded as comprising, in combination with the statutory requirements, a contract.

Boards' proposal on the enforceable nature of arrangement as an indicator in AASB ED 319/NZASB ED 2022-3

     BC185        Based on the above deliberations, the Boards decided to propose as an indicator of public sector arrangements to be accounted for as insurance contracts, the absence of a practical ability to retrospectively change coverage or benefits. The Boards also decided to