Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p89
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 89/101)
Character Range: 277510–280640

sector entities could apply.

Boards' position on discounting and inflating in AASB ED 319/NZASB ED 2022‑3

     BC296        The Boards considered whether there might be a need for public sector-specific modifications to the discount rate requirements of AASB 17/PBE IFRS 17 to address concerns about up-front loss recognition and volatility.

     BC297        The Boards decided that they would not propose any modifications on discounting fulfilment cash flows for the following reasons.

          (a) The same discounting issues which arise for public sector entities also arise for private sector entities, while acknowledging those issues can have a more significant impact for public sector entities.

          (b) The issues of volatility of liabilities due to discount rate changes from period to period are also a feature of the discount rate requirements in other Standards (such as AASB 119/PBE IPSAS 39 Employee Benefits), and that any efforts to address these issues would need to involve a broad-based project that goes beyond a project on insurance arrangements in the public sector.

          (c) Any project on discount rates might involve a broader consideration of measurement issues more generally.

     BC298        Specifically in relation to the possible application of long-run investment returns as the basis for discount rates, the Boards noted that, conventionally, assets and liabilities are measured independently. That is, for example, the measurement of a liability is based on the liability's inherent characteristics, not on the characteristics of any assets that might be available to settle the liability. Accordingly, the Boards concluded that any consideration of overturning long-standing conventions of this nature would need to involve a review of principles that go beyond a project on insurance arrangements in the public sector.

Discounting and inflating – AASB ED 319/NZASB ED 2022-3 feedback and Boards' conclusion

     BC299        There was no specific feedback from respondents to AASB ED 319/NZASB ED 2022-3 on discounting and inflating. The Boards concluded that it is not appropriate to have public sector modifications on discounting and/or inflating fulfilment cash flows in the context of AASB 17/PBE IFRS 17.

Measurement of investments backing insurance liabilities

     BC300        When it is feasible under Accounting Standards to measure an investment that backs insurance liabilities at fair value through profit or loss, AASB 1023/PBE IFRS 4 requires an entity to apply fair value through profit or loss accounting. This includes applying accounting policy choices/designations within Accounting Standards to use fair value through profit or loss accounting for: financial instruments; investment property; and, in relation to separate financial statements, investments in subsidiaries, joint ventures and associates.

     BC301        The Boards acknowledged that the AASB 1023/PBE IFRS 4 requirements were based on a view that fair value accounting for investments would provide the greatest level of balance sheet and income statement consistency with the