Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p76
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 76/101)
Character Range: 241304–244284

for a public sector arrangement is a pre-requisite for applying AASB 17/PBE IFRS 17 on the basis that the coverage period is crucial for determining the fulfilment cash flows to include when measuring insurance liabilities and for determining the timing of insurance revenues and expenses.

          (b) The enforceable nature of a public sector arrangement is a pre-requisite for applying AASB 17/PBE IFRS 17 on the basis that a key feature of any contract is its enforceability and public sector arrangements that lack enforceability are more in the nature of social benefits.

          (c) The similarity of risks covered and benefits provided with those offered by a relevant counterpart private sector insurer is an indicator to be applied to determine whether arrangements fall within the scope of AASB 17/PBE IFRS 17 on the basis that this is consistent with a transaction neutral approach to standard-setting. The greater the level of similarity between the risks accepted and benefits provided by a public sector entity and those offered by a relevant counterpart private sector insurer, the more likely it would be that the public sector entity's arrangements would be accounted for as insurance contracts.

          (d) The source and extent of funding from those who stand to benefit from an arrangement is an indicator to be applied to determine whether arrangements fall within the scope of AASB 17/PBE IFRS 17 on the basis that a user-pays arrangement is consistent with a commercial arrangement for the transfer of insurance risk. The greater the extent of funding from those who stand to benefit from an arrangement, the more likely it would be that the public sector entity's arrangements would be accounted for as insurance contracts. A user-pays arrangement is typically distinguishable from a social benefit scheme or (non-insurance) compensation scheme.

          (e) In the event that the indicators in paragraphs (c) and (d) are not collectively definitive in determining whether arrangements fall within the scope of AASB 17/PBE IFRS 17, collective consideration is given to whether, in respect of the relevant arrangements:

               (i) the entity has management practices and assesses financial performance in a manner consistent with insurance industry practices; and

               (ii) there is a separate fund, or earmarked assets, that are restricted to being used to meet benefits to participants in the arrangement;

          in order to determine whether arrangements fall within the scope of AASB 17/PBE IFRS 17.

     BC250        In respect of the pre-requisite for an identifiable coverage period, the Boards concluded that additional guidance would be helpful to explain that a person's inherent status in meeting eligibility criteria for participation in a scheme, stands in contrast to the existence of an identifiable coverage period.

     BC251        In relation to the indicator 'similarity of risks covered and benefits