Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p53
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 53/101)
Character Range: 177299–180495

depend on the extent to which the entity and its management is treated as operating independently from its controlling government. A relatively independent entity might, for example, be responsible for entering into its own risk mitigation measures, such as a reinsurance program, or maintaining a particular funding-to-liabilities ratio, and may not be expected to rely on measures such as government guarantees.

Identifying public sector arrangements that fall within the scope of AASB 17/PBE IFRS 17 (modifications to paragraph 6 and addition of Appendix E)

     BC152        In developing their proposals for identifying which arrangements in the public sector would be accounted for as insurance contracts, the Boards' general approach was based on:

          (a) considering the definitions and guidance on 'insurance contracts', 'insurance contract services' and 'insurance risk' in AASB 17/PBE IFRS 17; and

          (b) identifying a range of indicators that would be considered collectively, along with related guidance.

     BC153        The Boards took the view that a collective consideration of the proposed indicators discussed below in paragraphs BC156–BC216 would mean that:

          (a) the existence of a particular indicator would not necessarily result in AASB 17/PBE IFRS 17 being applicable; and

          (b) the absence of a particular indicator would not necessarily result in AASB 17/PBE IFRS 17 being inapplicable.

     BC154        In developing the proposed indicators, the Boards noted that the main alternative requirements applicable to liabilities of public sector entities are set out in AASB 137/PBE IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets. Accordingly, the Boards were mindful of the key differences between the requirements of AASB 17/PBE IFRS 17 and AASB 137/PBE IPSAS 19, which include different discount rate requirements for present valuing cash flows and the specific requirement in AASB 17/PBE IFRS 17 for a risk adjustment.

     BC155        Paragraphs BC156 to BC233 outline the Boards' deliberations in identifying proposed indicators for determining when AASB 17/PBE IFRS 17 would be applied. This includes deliberations on indicators that were considered and rejected, discussed below in paragraphs BC217–BC233.

Similarity of risks covered and benefits provided

     BC156        The AASB Discussion Paper (2017) proposals identified, as a suggested criterion for determining whether activities relate to insurance, that the transactions or arrangements entered into have similar characteristics and relate to a similar level of insurance risk as those entered into by for-profit private sector entities that are accounted for as insurance contracts [AASB DP.E14(c)]. This is not a factor explicitly identified in NZASB ED 2018-7, although it can be argued that it was proposed implicitly via other proposed indicators.

     BC157        The Boards observed that some public sector arrangements have direct counterparts with private sector insurance contracts, including for example, workers' compensation contracts. In the context of a transaction neutral approach to accounting standard setting, the Boards