Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p62
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 62/101)
Character Range: 202355–205386

with the aim of ensuring that the levels of social benefits provided will not exceed the level of funding available from contributions or levies.

     BC189        Some respondents to NZASB ED 2018-7 commented that the meaning of 'fully funded' is not necessarily clear for entities that aim to be self-funded over the long term, but that in any given year might be:

          (a) overpricing to make up for past deficits;

          (b) underpricing to use up past surpluses; or

          (c) underpricing to suit current economic conditions.

Substantially self-funded

     BC190        The AASB was also mindful of the IPSASB's work on social benefits in preparing its Discussion Paper (2017) proposals, but considered that 'fully funded' would be too much of a bright line [AASB DP.BC28(b)(ii)].

     BC191        Instead, one of the non-mandatory criteria proposed in the AASB Discussion Paper for determining whether AASB 17 should apply in the public sector was that the arrangement be 'substantially self-funded' [AASB DP.E14(a)]. Under the proposal, there were two aspects to self-funding:

          (a) the source of funding should be those who stand to benefit from the arrangement or those who exacerbate the risks to potential beneficiaries; and

          (b) the revenue being sufficient and/or the benefit levels being managed such that the arrangement is self-sustaining.

     BC192        There was a limited response to the proposal of a 'substantially self-funded' criterion. Those who did respond generally supported using the criterion.

Beneficiary pays

     BC193        The Boards observed that all of the public sector entities in Australia and New Zealand that are currently applying the insurance Standards, or have contemplated applying the insurance Standards, receive contributions from arrangement participants either directly or indirectly via premiums or levies. In general, most or all of the funding for these entities is sourced from arrangement participants, who stand to benefit from the coverage.

     BC194        The Boards also observed that some of the public sector entities in Australia that are currently not applying the insurance Standards also source most or all of their funding from those who stand to benefit from the coverage.

     BC195        The Boards noted that, if this indicator were applied, it would at least have the benefit of immediately ruling out the application of the insurance Standards to a range of social benefits such as aged pensions or universal healthcare activities and disability support. The Boards also noted a possible complication is that schemes such as Medicare in Australia, at least notionally, have dedicated funding through the Medicare levy on taxpayers. However, the Boards considered the Medicare levy to probably be sufficiently like a tax to be regarded as not being a beneficiary pays model as intended under this indicator. Accordingly, the Boards considered whether it might also be helpful to explain that the significance