Document ID: chunk:federal_register_of_legislation:F2023C00382:front:0:p22
Version: federal_register_of_legislation:F2023C00382
Segment Type: other
Provision Reference: 
Character Range: 55499–58354

contractual service margin over the duration of the group of contracts in a systematic way that reflects the transfer of investment services under the contract.

Modification and derecognition

Modification of an insurance contract
72 If the terms of an insurance contract are modified, for example by agreement between the parties to the contract or by a change in regulation, an entity shall derecognise the original contract and recognise the modified contract as a new contract, applying AASB 17 or other applicable Standards if, and only if, any of the conditions in (a)–(c) are satisfied. The exercise of a right included in the terms of a contract is not a modification. The conditions are that:
(a) if the modified terms had been included at contract inception:
(i) the modified contract would have been excluded from the scope of AASB 17, applying paragraphs 3–8A;
(ii) an entity would have separated different components from the host insurance contract applying paragraphs 10–13, resulting in a different insurance contract to which AASB 17 would have applied;
(iii) the modified contract would have had a substantially different contract boundary applying paragraph 34; or
(iv) the modified contract would have been included in a different group of contracts applying paragraphs 14–24.
(b) the original contract met the definition of an insurance contract with direct participation features, but the modified contract no longer meets that definition, or vice versa; or
(c) the entity applied the premium allocation approach in paragraphs 53–59 or paragraphs 69–70 to the original contract, but the modifications mean that the contract no longer meets the eligibility criteria for that approach in paragraph 53 or paragraph 69.
73 If a contract modification meets none of the conditions in paragraph 72, the entity shall treat changes in cash flows caused by the modification as changes in estimates of fulfilment cash flows by applying paragraphs 40–52.

Derecognition
74 An entity shall derecognise an insurance contract when, and only when:
(a) it is extinguished, ie when the obligation specified in the insurance contract expires or is discharged or cancelled; or
(b) any of the conditions in paragraph 72 are met.
75 When an insurance contract is extinguished, the entity is no longer at risk and is therefore no longer required to transfer any economic resources to satisfy the insurance contract. For example, when an entity buys reinsurance, it shall derecognise the underlying insurance contract(s) when, and only when, the underlying insurance contract(s) is or are extinguished.
76 An entity derecognises an insurance contract from within a group of contracts by applying the following requirements in AASB 17:
(a) the fulfilment cash flows allocated to the group are adjusted to eliminate the present value of the future cash flows