Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p55
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 55/101)
Character Range: 183050–186185

on the identity of the participants/policyholders. From the perspective of the public sector entity in its stand-alone general purpose financial statements, related-party participants/policyholders are nevertheless third parties.

Boards' proposal on similarity of risks covered and benefits as an indicator in AASB ED 319/NZASB ED 2022-3

     BC162        Based on the above deliberations, the Boards decided to propose as an indicator of public sector arrangements to be accounted for as insurance contracts, the similarity of risks covered and benefits provided due to the fact that the transfer of insurance risk is central to the definition of 'insurance contract'.

     BC163        The Boards considered how widely entities would be expected to search for counterpart insurance contracts and concluded it would be reasonable for entities to consider counterpart contracts both within and outside Australia and New Zealand, using information that is readily available. That is, public sector entities would not need to conduct an exhaustive global search for counterpart contracts.

Identifiable coverage period

     BC164        A key feature of an insurance contract in the context of AASB 17/PBE IFRS 17 is the existence of an identifiable coverage period, which is defined as 'the period during which the entity provides insurance contract services'. The coverage period provides the basis for determining the cash flows to include in measuring insurance contracts.

          (a) Most insurance contracts provide protection for events that occur during the coverage period – for example, coverage for claims that might arise from an incident over a one-year contract period. The claims may not come to light until after the coverage period has ended. These are sometimes referred to as 'claims incurred' contracts because the time when the event occurs is crucial to identifying valid claims.

          (b) Some insurance contracts provide protection for claims that arise during the coverage period, regardless of when the incidents that gave rise to the claims have occurred. These are sometimes referred to as 'claims made' contracts because the time when the claim emerges is crucial to identifying valid claims.

     BC165        The Boards observed that, instead of having an identifiable coverage period, social benefit type schemes tend to be open-ended and depend on participants continuing to meet eligibility criteria, which might include, for example, being unemployed, being a student, or being above a certain age. In that context, IPSAS 42.5 defines 'social benefit' as:

          cash transfers provided to:

               (a) specific individuals and/or households who meet eligibility criteria;

               (b) mitigate the effect of social risks; and

               (c) address the needs of society as a whole.

     The social benefit eligibility criteria relate to someone's inherent status, rather than relating to an uncertain future event that occurs within a particular coverage period.

     BC166        The field testing revealed that some stakeholders consider having an identifiable