Document ID: chunk:federal_register_of_legislation:F2024L00075:reg:38:p60
Version: federal_register_of_legislation:F2024L00075
Segment Type: reg
Provision Reference: reg 38 (pt 60/76)
Character Range: 203297–206395

Standards.

Nature, extent and management of risks
BC192        Having considered the types of risks to which a superannuation entity could be exposed, the AASB decided ED 179 should propose that:
(a)                   the disclosure requirements in paragraphs 6 to 30 of AASB 7 should not apply; and
(b)                   disclosure principles based on paragraphs 31 to 42 of AASB 7 and tailored for a superannuation context would facilitate the disclosure of useful information about significant risks to which an entity is exposed.
BC193        The AASB concluded that paragraphs 6 to 30 of AASB 7 are generally not relevant in a superannuation context.  For example:
(a)                   superannuation entities are not permitted to issue compound financial instruments with multiple embedded derivatives;
(b)                   paragraphs 9 to 11 of AASB 7 are intended to help explain an entity's choice to designate financial instruments at fair value through profit or loss,[21] whereas applying that measurement basis is the subject of specific requirements;
(c)                   paragraphs 25 to 30 of AASB 7 do not seem relevant because financial assets and any financial liabilities are measured at fair value through profit or loss; and for assets and liabilities relating to member benefits, there are the challenges noted in paragraph BC114(b) about obtaining fair values; and
(d)                   superannuation entities generally do not have loans and are prohibited from holding a borrowing directly, and therefore accounting mismatches of related loans and liabilities are generally not relevant.
BC194        In light of constituent feedback on ED 179, the AASB redeliberated the risk disclosure proposals and noted:
(a)                   the support for not requiring the application of paragraphs 6 to 30 of AASB 7 for the reasons in paragraph BC193;
(b)                   there may be less need for specific principles for superannuation entities regarding disclosures about the nature and extent of risks than assumed for the purposes of ED 179;
(c)                   although AASB 7 scopes out obligations arising from employee benefit plans to which AASB 119 applies, a member liability meets the financial liability definition.  This is because meeting members' benefits can be considered a contractual obligation of the superannuation entity (in the sense that defined contribution entitlements must be met and defined benefit entitlements are specified in trust deeds), and members' benefits are normally paid in cash;
(d)                   information in relation to the risk an employer-sponsor of defined benefit members will not be able to make contributions at a level that would be expected to permit the superannuation entity to meet members' accrued benefits is of critical importance in understanding a superannuation entity's overall financial position (solvency), irrespective of whether there is a surplus or deficit, and such risk is more in the nature of non-performance or economic dependency risk than credit risk; and
(e)                   additional