Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p2
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 2/101)
Character Range: 35499–38628

entity considers the pre-requisites, indicators and the other considerations outlined in paragraphs E6–E36.

Identifying insurance contracts in a public sector context (paragraphs Aus6.1 and Aus6.2)

Applying the pre-requisites, indicators and other considerations

     E6                    In accordance with paragraph Aus6.1, a public sector entity would need to consider whether AASB 17 applies to an arrangement if, and only if, both of the following pre-requisites are established:

          (a) the arrangement is enforceable – refer to guidance in paragraphs E9–E12; and

          (b) the arrangement has an identifiable coverage period – refer to guidance in paragraphs E13–E17.

     E7                    When both of the pre-requisites in paragraph E6 are established in respect of an arrangement, subject to paragraphs 8 and 8A an entity applies the following indicators on a collective basis to determine whether the arrangement gives rise to insurance contracts that fall within the scope of AASB 17:

          (a) the source and extent of funding – refer to guidance in paragraphs E18–E22; and

          (b) the similarity of risks covered and benefits provided – refer to guidance in paragraphs E23–E30.

     E8                    When applying the indicators in paragraph E7 does not definitively determine whether an arrangement gives rise to insurance contracts that fall within the scope of AASB 17, a public sector entity applies the following other considerations on a collective basis to determine whether the arrangement gives rise to insurance contracts that fall within the scope of AASB 17:

          (a) the management practices and assessment of financial performance applied – refer to guidance in paragraphs E31–E33; and

          (b) the existence of a separate fund, or earmarked assets, that are restricted to being used to meet benefits – refer to guidance in paragraphs E34–E36.

Pre-requisite: Enforceable nature of arrangement

     E9                    An insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party (the insured) by agreeing to compensate the insured if a specified future event adversely affects the insured. Under Australian Accounting Standards, a contract is an agreement between two or more parties that creates enforceable rights and obligations. When there is not an enforceable contract in respect of a public sector arrangement, that arrangement is not within the scope of AASB 17.

     E10                In determining whether there is an enforceable contract, the following matters are relevant:

          (a) when a public sector entity or its controlling government does not have the practical ability under existing or substantively enacted legislation to deny or change promised benefits or amounts based on agreed parameters, it is indicative of an enforceable contract; and

          (b) when an individual or entity can identify promised amounts or amounts based on agreed parameters that they will receive from the public sector entity on the occurrence of specified events, it