Document ID: chunk:federal_register_of_legislation:F2021C00205:body:0:p6
Version: federal_register_of_legislation:F2021C00205
Segment Type: other
Provision Reference: 
Character Range: 13949–16921

deposit component.

Recognition and measurement

Temporary exemption from some other Australian Accounting Standards
13 Paragraphs 10–12 of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors specify criteria for an entity to use in developing an accounting policy if no Standard applies specifically to an item. However, this Standard exempts an insurer from applying those criteria to its accounting policies for:
(a) insurance contracts that it issues (including related acquisition costs and related intangible assets, such as those described in paragraphs 31 and 32); and
(b) reinsurance contracts that it holds.
14 Nevertheless, this Standard does not exempt an insurer from some implications of the criteria in paragraphs 10–12 of AASB 108. Specifically, an insurer:
(a) shall not recognise as a liability any provisions for possible future claims, if those claims arise under insurance contracts that are not in existence at the end of the reporting period (such as catastrophe provisions and equalisation provisions).
(b) shall carry out the liability adequacy test described in paragraphs 15–19.
(c) shall remove an insurance liability (or a part of an insurance liability) from its statement of financial position when, and only when, it is extinguished—ie when the obligation specified in the contract is discharged or cancelled or expires.
(d) shall not offset:
(i) reinsurance assets against the related insurance liabilities; or
(ii) income or expense from reinsurance contracts against the expense or income from the related insurance contracts.
(e) shall consider whether its reinsurance assets are impaired (see paragraph 20).

Liability adequacy test
15 An insurer shall assess at the end of each reporting period whether its recognised insurance liabilities are adequate, using current estimates of future cash flows under its insurance contracts. If that assessment shows that the carrying amount of its insurance liabilities (less related deferred acquisition costs and related intangible assets, such as those discussed in paragraphs 31 and 32) is inadequate in the light of the estimated future cash flows, the entire deficiency shall be recognised in profit or loss.
16 If an insurer applies a liability adequacy test that meets specified minimum requirements, this Standard imposes no further requirements. The minimum requirements are the following:
(a) The test considers current estimates of all contractual cash flows, and of related cash flows such as claims handling costs, as well as cash flows resulting from embedded options and guarantees.
(b) If the test shows that the liability is inadequate, the entire deficiency is recognised in profit or loss.
17 If an insurer's accounting policies do not require a liability adequacy test that meets the minimum requirements of paragraph 16, the insurer shall:
(a) determine the carrying amount of the relevant insurance liabilities[1]  less the carrying amount of:
(i) any