Document ID: chunk:federal_register_of_legislation:F2023C00382:front:0:p12
Version: federal_register_of_legislation:F2023C00382
Segment Type: other
Provision Reference: 
Character Range: 29499–32431

estimates of cash flows. The discount rates applied to the estimates of the future cash flows described in paragraph 33 shall:
(a) reflect the time value of money, the characteristics of the cash flows and the liquidity characteristics of the insurance contracts;
(b) be consistent with observable current market prices (if any) for financial instruments with cash flows whose characteristics are consistent with those of the insurance contracts, in terms of, for example, timing, currency and liquidity; and
(c) exclude the effect of factors that influence such observable market prices but do not affect the future cash flows of the insurance contracts.

Risk adjustment for non-financial risk (paragraphs B86–B92)
37 An entity shall adjust the estimate of the present value of the future cash flows to reflect the compensation that the entity requires for bearing the uncertainty about the amount and timing of the cash flows that arises from non-financial risk.

Contractual service margin
38 The contractual service margin is a component of the asset or liability for the group of insurance contracts that represents the unearned profit the entity will recognise as it provides insurance contract services in the future. An entity shall measure the contractual service margin on initial recognition of a group of insurance contracts at an amount that, unless paragraph 47 (on onerous contracts) or paragraph B123A (on insurance revenue relating to paragraph 38(c)(ii)) applies, results in no income or expenses arising from:
(a) the initial recognition of an amount for the fulfilment cash flows, measured by applying paragraphs 32–37;
(b) any cash flows arising from the contracts in the group at that date;
(c) the derecognition at the date of initial recognition of:
               (i)                     any asset for insurance acquisition cash flows applying paragraph 28C; and
               (ii)                   any other asset or liability previously recognised for cash flows related to the group of contracts as specified in paragraph B66A.
39 For insurance contracts acquired in a transfer of insurance contracts or in a business combination within the scope of AASB 3, an entity shall apply paragraph 38 in accordance with paragraphs B93–B95F.

Subsequent measurement
40 The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of:
(a) the liability for remaining coverage comprising:
(i) the fulfilment cash flows related to future service allocated to the group at that date, measured applying paragraphs 33–37 and B36–B92;
(ii) the contractual service margin of the group at that date, measured applying paragraphs 43–46; and
(b) the liability for incurred claims, comprising the fulfilment cash flows related to past service allocated to the group at that date, measured applying paragraphs 33–37 and B36–B92.
41 An entity shall recognise income and expenses