Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p81
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 81/101)
Character Range: 254998–258239

risks have been allocated to the entity, which were accompanied by particular (usually legislated) accountability mechanisms and reporting requirements.

          (c) A deliberate policy has been adopted to impose accountability mechanisms and reporting requirements on a captive insurer, consistent with (for example) having an independent board of directors. Entities with independent boards of directors/management might be particularly keen to demonstrate accountability and prepare separate financial statements. Some stakeholders consider the fact that their customers are related entities makes it all the more important that they prepare separate general purpose financial statements.

Boards' position on captive insurers in AASB ED 319/NZASB ED 2022-3

     BC267        The Boards considered that the issues surrounding captive insurers are essentially reporting entity issues, that could affect the application of Accounting Standards more generally, rather than being issues of particular relevance to the insurance project. The Boards observed that governments which regard their captive insurer(s) as needing to prepare general purpose financial statements would have to determine whether they have:

          (a) insurance contracts and need to apply insurance contract accounting; or

          (b) are only service providers, akin to insurance brokers that are intermediaries between policyholders and insurers, that would apply, for example, AASB 15 Revenue from Contracts with Customers /PBE IPSAS 9 Revenue from Exchange Transactions.

     The Boards also observed that governments which regard their captive insurer(s) as not needing to prepare general purpose financial statements, might seek to have them prepare a type of segment information, for example, for management purposes.

     BC268        Accordingly, the Boards decided not to propose public sector modifications in respect of captive insurers because wider issues regarding the identification of reporting entities are at stake that are not specific to this project. They noted, if a jurisdiction determines that an entity should prepare general purpose financial statements, provided the entity's activities fall within the scope of AASB 17/PBE IFRS 17, that Standard should be applied. The Boards considered it would be inappropriate, for example, to exempt public sector captive insurers from applying AASB 17/PBE IFRS 17 in their separate financial statements.

Captive insurers – AASB ED 319 feedback and the AASB's conclusions

     BC269        Some Australian respondents to AASB ED 319 expressed the following concerns about not providing any specific relief from applying AASB 17 to captive insurers and noted the following issues and perspectives.

          (a) The user of captive insurer financial statements is the controlling government, and the application of AASB 17 would provide no additional information to that user.

          (b) The costs of preparing individual captive entity financial statements in accordance with AASB 17, only to eliminate this treatment on consolidation, would exceed the potential benefit.

          (c) Issues could arise when an entity that does not prepare general purpose financial statements has