Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:12:p1
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 12 (pt 1/2)
Character Range: 21344–24279

12                    Paragraphs AusB64.1 and AusB121.1 are added to Appendix B Application guidance. Paragraphs B64 and B121 are not amended but are included for reference.

      Measurement (paragraphs 29-71)

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          Cash flows within the contract boundary (paragraph 34)
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          B64 Paragraph 34 refers to an entity's practical ability to set a price at a future date (a renewal date) that fully reflects the risks in the contract from that date. An entity has that practical ability in the absence of constraints that prevent the entity from setting the same price it would for a new contract with the same characteristics as the existing contract issued on that date, or if it can amend the benefits to be consistent with the price it will charge. Similarly, an entity has that practical ability to set a price when it can reprice an existing contract so that the price reflects overall changes in the risks in a portfolio of insurance contracts, even if the price set for each individual policyholder does not reflect the change in risk for that specific policyholder. When assessing whether the entity has the practical ability to set a price that fully reflects the risks in the contract or portfolio, it shall consider all the risks that it would consider when underwriting equivalent contracts on the renewal date for the remaining service. In determining the estimates of future cash flows at the end of a reporting period, an entity shall reassess the boundary of an insurance contract to include the effect of changes in circumstances on the entity's substantive rights and obligations.

               AusB64.1 Public sector entities often operate within a broad government policy framework that takes into account general economic circumstances and community needs and not only the circumstances specific to the entity and its policyholders. For example, there may be cases when the entity's management, including relevant government Minister(s), deliberately phase in price increases or decreases or benefit adjustments over a long period to help individuals or businesses manage through an economic cycle. Although the phasing-in process might notionally take into account risks relating to a number of coverage periods, this is not the motivating factor. The broader policy objectives are the motivating factor. Therefore, in the context of AASB 17 paragraph 34(b)(ii), the public sector entity would not be regarded as taking into account the risks that relate to periods after the reassessment date due to broader policy objectives influencing the phasing in of price increases or decreases or benefit adjustments.

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      Insurance revenue (paragraphs 83 and 85)

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          B121 Paragraph 83 requires the amount of insurance revenue recognised in a period to depict the transfer of promised services at an amount that reflects the consideration to which the