Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p16
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 16/101)
Character Range: 74633–77790

may not possess) the information necessary to differentiate between onerous versus non-onerous contracts at initial recognition. For example, some entities are not permitted to hold information on gender or age; however, if available, gender and/or age-related information would enable the entity to identify onerous versus non-onerous contracts.

          (c) Ordinarily, all of a public sector entity's onerous contracts and non-onerous contracts would be the result of regulatory impediments that are covered by the relief in AASB 17/PBE IFRS 17.20; however, there may be exceptions.

          (d) The entity takes a long-term view to avoid volatility in premiums/levies – periodically, there may be profitable or onerous contracts that depend on whether, for example, there are deficits to be 'rectified' or surpluses to be 'used up'.

     BC29            The Boards considered a number of possible approaches to addressing the sub-grouping of contracts in a public sector context, including the following.

          (a) All public sector entities should be exempted from AASB 17/PBE IFRS 17.16, on the basis that:

               (i) timely information on profitability is not relevant to most public sector entities; and

               (ii) whether public sector entities have portfolios of onerous contracts and sub-groups of onerous contracts;

          are not relevant. However, it was acknowledged that information on sub-groups of onerous contracts might be useful in helping to inform users about cross-subsidies between different classes of policyholders.

          (b) Only not-for-profit public sector entities (which is the majority of the relevant entities) should be exempted from AASB 17/PBE IFRS 17.16 for the reasons noted in (a) above.

          (c) All public sector entities should be exempted from AASB 17/PBE IFRS 17.16; however, require disclosure about the nature of the pricing process, including constraints under which an entity operates to cross-subsidise different policyholder cohorts, that can lead to some groups of contracts being onerous. This might provide additional relevant information about the impact of price constraints on each entity. However, it was acknowledged that the additional disclosure could be a burden and may already be readily available from other sources (although the burden might be mitigated by permitting disclosure by cross-reference).

          (d) AASB 17/PBE IFRS 17.16 should apply to public sector entities and guidance should be provided for the public sector context on the manner in which AASB 17/PBE IFRS 17.20 would provide relief from the need to sub-group contracts.

Sub-grouping onerous versus non-onerous contracts – proposals for AASB ED 319/NZASB ED 2022-3

     BC30            Based on the above deliberations, the Boards decided to propose an exemption for all public sector entities from applying the requirements in AASB 17/PBE IFRS 17.16. That is, public sector entities would not be required to sub-group contracts based on whether, at initial recognition, they are:

          (a) onerous;

          (b) have no significant possibility of becoming onerous