Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p88
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 88/101)
Character Range: 274786–277785

rates required for measuring provisions reflect current market assessments of the time value of money and the risks specific to the liability.

     BC292        The Boards noted that, based on stakeholder outreach conducted in 2020-21, there are differing views on the rates required by AASB 137/PBE IPSAS 19.

          (a) Some stakeholders interpret the AASB 137/PBE IPSAS 19 requirements as being the same or similar to the discounting requirements in AASB 1023/PBE IFRS 4 and AASB 17/PBE IFRS 17.

          (b) Some stakeholders regard the AASB 137/PBE IPSAS 19 requirements as being different from the discounting requirements in AASB 1023/PBE IFRS 4 and AASB 17/PBE IFRS 17. They see a key potential difference being the focus of AASB 1023/PBE IFRS 4 (and AASB 17/PBE IFRS 17) on an entity perspective because an insurer is expected to fulfil its insurance liabilities. In contrast, they see the focus of AASB 137/PBE IPSAS 19 as being on settlement, which could be with a third party and be measured at more or less than face value.

Presentation

     BC293        The Boards observed that:

          (a) under AASB 1023/PBE IFRS 4, both the initial and subsequent impacts of discounting and inflating fulfilment cash flows are presented within the 'underwriting result'; however,

          (b) under AASB 17/PBE IFRS 17:

               (i) only the initial impacts of discounting fulfilment cash flows are presented within the 'insurance service result';

               (ii) the impacts of subsequent discount rate changes are presented in 'insurance finance income or expenses', including the impact on insurance liabilities of the unwinding of the discount as time passes and the impact of discount rate changes under AASB 17/PBE IFRS 17.87; and

               (iii) some of the subsequent impacts of inflation rate changes are presented in 'insurance service result' and others in 'insurance finance income or expenses' under AASB 17.B128/PBE IFRS 17.AG128.

     BC294        The Boards noted that at least some of the volatility currently presented as a part of the underwriting result would be separately presented under AASB 17/PBE IFRS 17 as insurance finance income or expenses, which may help facilitate explaining the impacts of changing discount rates to users of the financial statements.

     BC295        The Boards also noted that the distinction between the subsequent impacts of inflation rate changes that are presented in 'insurance service result' versus 'insurance finance income or expenses' has yet to be clarified in practice, but the issues are the same for both private and public sector entities. Accordingly, the Boards expect that an industry practice will emerge that public sector entities could apply.

Boards' position on discounting and inflating in AASB ED 319/NZASB ED 2022‑3

     BC296        The Boards considered whether there might be a need for public sector-specific modifications to the discount rate requirements of AASB 17/PBE IFRS 17