Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p82
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 82/101)
Character Range: 257953–261132

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 insurance arrangements which are administered by a government department. Under AASB 1050, the government department may need to apply AASB 17 to prepare its administered items disclosure note in its general purpose financial statements. However, at the Whole of Government level, those arrangements are recognised under AASB 137.

          (d) A similar issue arises for the General Government Sector (GGS) financial statements where AASB 17 accounting would need to be applied in relation to captive insurance activities conducted by Public Financial Corporations (PFC)[27] that are eliminated on consolidation in the Whole of Government financial statements.

     There were no comments from New Zealand stakeholders on captive insurers.

     BC270        The AASB noted it would be consistent with paragraph 24 of AASB 1050 Administered Items, although not the only possible interpretation, for a government department administering an arrangement that falls within the scope of AASB 17 to prepare administered item disclosures based on applying AASB 17. This is because it is not self-insurance from the perspectives of the administered entity or of the administering government department.

     BC271        The AASB also noted that the issue of effectively preparing two sets of financial statements using different accounting policies is not new because there are current instances of reporting AASB 1023 General Insurance Contracts information for insurance activities conducted between public sector entities controlled by the same government. Therefore, currently, two sets of financial information are sometimes prepared.

     BC272        The AASB noted that, for the reasons outlined in paragraph BC266, current reporting practices for captive insurance arrangements in the public sector[28] vary widely in terms of the type of reporting and the accounting policies applied and the formats include the following:

          (a) separate stand-alone general purpose financial statements, presumably on the basis the arrangements are deemed to be a reporting entity;

          (b) as a segment of the general purpose financial statements of an entity that also includes other (non-captive) insurance arrangements; and

          (c) financial information disclosures presented in the notes to the general purpose financial statements of another entity, such as the responsible government department, whether as part of an administered items note or presented in some other way.

     BC273        The AASB considered four possible alternative approaches.

          (a) Approach 1: Allow captive insurers a free choice to apply AASB 17 or AASB 137 regardless of whether the activities would fall within the scope of AASB 17 based on the pre-requisites, indicators and other considerations, which would avoid governments being forced to apply different forms of accounting at