Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p9
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 9/101)
Character Range: 54674–57750

should be read in conjunction with the guidance set out in paragraphs E9–E36, as referenced in the diagram.

Basis for Conclusions

This Basis for Conclusions accompanies, but is not part of, AASB 2022-9 Amendments to Australian Accounting Standards – Insurance Contracts in the Public Sector.

Introduction

     BC1               This Basis for Conclusions summarises the Australian Accounting Standards Board's and the New Zealand Accounting Standards Board's considerations in reaching the conclusions on public sector modifications to AASB 17 Insurance Contracts and PBE IFRS 17 Insurance Contracts. It sets out the reasons why the Boards developed the modifications, the approach taken to developing those modifications and the bases for the key decisions made. In making decisions, individual Board members gave greater weight to some factors than to others.

Reasons for making public sector modifications

     BC2               AASB 17 and PBE IFRS 17, as first issued in 2017, have a mandatory application date of annual reporting periods beginning on or after 1 January 2023.

     BC3               IFRS 17 Insurance Contracts, which is incorporated into AASB 17/PBE IFRS 17, has been developed largely for the for-profit private sector, and to a relevant extent for a mutual entity context [AASB 17.B16/ PBE IFRS 17.AG16]. IFRS 17 has not been designed to cater for the public sector context. Accordingly, the AASB and the NZASB undertook a joint project to consider the need for modifications in AASB 17/ PBE IFRS 17 to suit the public sector context in Australia and New Zealand.

     BC4               There are important differences between the public sector and private sector contexts that can affect the manner in which IFRS 17 applies.

     BC5               While mutual entities may be not-for-profit entities in the sense that members share in any surpluses, they nonetheless would typically need to build and maintain reserves to remain in business by generating surpluses. Accordingly, the users of financial statements of private sector entities (including mutual entities) when compared with public sector entities can have very different perspectives on the significance of onerous contracts, compensation needed for bearing risk, and the need to hold capital. Key drivers of these different perspectives in the public sector can include monopoly powers, access to government guarantees and taxpayer funding and a focus on public policy objectives.

     BC6               Accordingly, there is a strong conceptual underpinning for having modifications to AASB 17/PBE IFRS 17 that are applicable only to public sector entities.

     BC7               In addition, there may be existing inconsistencies in Australia in the application of Standards as some Australian public sector entities with similar arrangements have been applying AASB 1023 General Insurance Contracts and others have been applying AASB 137 Provisions, Contingent Liabilities and Contingent Assets. The project is intended to help achieve a greater level of consistency of