Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p69
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 69/101)
Character Range: 221756–224701

in 2020–21, there was virtually no support for excluding a public sector entity from applying AASB 17 on the basis that it is a not-for-profit entity. For the few stakeholders who supported automatically including a public sector entity within the scope of AASB 17 on the basis that it is a for-profit entity, their support hinged on a view that a for-profit entity is more likely to be seeking to profit from the service of bearing risk. These stakeholders viewed this as consistent with AASB 17 requiring a risk adjustment in measuring insurance liabilities and recognising revenue from bearing risk in a pattern based on the release from risk.

     BC220        The AASB observed that the differing classifications (for-profit versus not-for-profit) across Australian jurisdictions seem to be driven largely by the funding structure and, for example, whether the entity's enabling legislation allows for the entity to pay dividends to government in recognition of the cost of government capital deployed to the entity.

New Zealand entities

     BC221        All New Zealand public sector entities currently applying PBE IFRS 4 classify themselves as not seeking to profit from their activities.[24]

     BC222        NZASB ED 2018-7 did not include any proposals relating to the profit-seeking motive.

Boards' proposal on profit seeking not being an indicator in AASB ED 319/NZASB ED 2022-3

     BC223        The Boards noted that the IASB did not regard the not-for-profit nature of mutual insurance entities to be a factor that would cause IFRS 17 to be inapplicable. The IFRS 17 Basis for Conclusions makes it clear that, in the IASB's view, IFRS 17 can be applied consistently to for-profit entities and mutual entities [IFRS 17.BC264 to BC269]. For-profit insurance entities and mutual insurance entities often compete for customers in the same markets.

     BC224        Based on the above deliberations, the Boards decided to propose that the not-for-profit nature of an entity should not be a barrier to public sector arrangements being accounted for as insurance contracts, and this was not proposed as an indicator. However, the Boards also noted that the classification (as for-profit versus not-for-profit) would be a part of the context in which the proposed indicators are considered and, therefore, could impact on the outcome of a collective assessment of those indicators.

Scoping out social benefits or specific entities

     BC225        The Boards noted that IPSAS 42.5 includes a definition of 'social risks', which mentions events or circumstances that are intended to give rise to distinct benefits from the causes of other forms of aid, such as benefits provided as the result of a disaster [IPSAS 42.AG10]. The IPSAS 42 definition is:

               Social risks are events or circumstances that:

               (a) relate to the characteristics of individuals and/or households – for example, age, health,