Document ID: chunk:federal_register_of_legislation:F2021C00205:body:0:p12
Version: federal_register_of_legislation:F2021C00205
Segment Type: other
Provision Reference: 
Character Range: 29495–32465

9 shall be read as referring to paragraph AG7 of AASB 139. References to paragraphs 5.4.3 and B5.4.6 of AASB 9 shall be read as referring to paragraph AG8 of AASB 139.

Changes in accounting policies
21 Paragraphs 22–30 apply both to changes made by an insurer that already applies IFRSs and to changes made by an insurer adopting Australian Accounting Standards for the first time.
22 An insurer may change its accounting policies for insurance contracts if, and only if, the change makes the financial statements more relevant to the economic decision-making needs of users and no less reliable, or more reliable and no less relevant to those needs. An insurer shall judge relevance and reliability by the criteria in AASB 108.
23 To justify changing its accounting policies for insurance contracts, an insurer shall show that the change brings its financial statements closer to meeting the criteria in AASB 108, but the change need not achieve full compliance with those criteria. The following specific issues are discussed below:
(a) current interest rates (paragraph 24);
(b) continuation of existing practices (paragraph 25);
(c) prudence (paragraph 26);
(d) future investment margins (paragraphs 27–29); and
(e) shadow accounting (paragraph 30).

Current market interest rates
24 An insurer is permitted, but not required, to change its accounting policies so that it remeasures designated insurance liabilities[3]  to reflect current market interest rates and recognises changes in those liabilities in profit or loss. At that time, it may also introduce accounting policies that require other current estimates and assumptions for the designated liabilities. The election in this paragraph permits an insurer to change its accounting policies for designated liabilities, without applying those policies consistently to all similar liabilities as AASB 108 would otherwise require. If an insurer designates liabilities for this election, it shall continue to apply current market interest rates (and, if applicable, the other current estimates and assumptions) consistently in all periods to all these liabilities until they are extinguished.

Continuation of existing practices
25 An insurer may continue the following practices, but the introduction of any of them does not satisfy paragraph 22:
(a) measuring insurance liabilities on an undiscounted basis.
(b) measuring contractual rights to future investment management fees at an amount that exceeds their fair value as implied by a comparison with current fees charged by other market participants for similar services. It is likely that the fair value at inception of those contractual rights equals the origination costs paid, unless future investment management fees and related costs are out of line with market comparables.
(c) using non-uniform accounting policies for the insurance contracts (and related deferred acquisition costs and related intangible assets, if any) of subsidiaries, except as