Fatal-Flaw Review Draft Standard: Insurance Contracts in the Public Sector

Wednesday, October 26, 2022

The AASB has issued a Fatal-Flaw Review Draft version of a proposed Standard that would amend AASB 17 Insurance Contracts for application by public sector entities. Comments are due by 11 November 2022.

The proposed Standard would modify AASB 17 to provide public sector entities with:

• factors to consider for identifying arrangements that fall within the scope of AASB 17 in a public sector context;
• an exemption from sub-grouping onerous versus non-onerous contracts at initial recognition;
• an exemption from sub-grouping contracts issued no more than a year apart;
• an amendment to the initial recognition requirements so that they do not depend on when contracts become onerous;
• guidance on coverage periods in a public sector context, which has consequences for determining the cash flows used to measure insurance liabilities and the pattern of revenue recognition; and
• an accounting policy choice to measure liabilities for remaining coverage applying the premium allocation approach.

The proposed Standard would also amend AASB 1050 Administered Items to provide an accounting policy choice for government departments to apply either AASB 17 or AASB 137 Provisions, Contingent Liabilities and Contingent Assets in determining the information to be disclosed about administered captive insurer activities.

The AASB decided to propose these amendments after considering feedback received on Exposure Draft ED 319 Insurance Contracts in the Public Sector.

The Fatal-Flaw Review Draft version of the proposed Standard AASB 2022-Y Amendments to Australian Accounting Standards – Insurance Contracts in the Public Sector is open for comment until Friday, 11 November 2022. Please submit your comments to the AASB, via the AASB website or email.