Life Insurance Contracts Acquired in a Business Combination or Portfolio Transfer (AASB1038_07-04_COMPmay19_01-20)

To comply with AASB 3 Business Combinations, an insurer shall, at the acquisition date, measure at fair value the insurance liabilities assumed and insurance assets acquired in a business combination. However, an insurer is permitted, but not required, to use an expanded presentation that splits the fair value of acquired insurance contracts into two components:

(a) a liability measured in accordance with the insurer’s accounting policies for life insurance contracts that it issues; and

(b) an intangible asset, representing the difference between:

(i) the fair value of the contractual insurance rights acquired and insurance obligations assumed; and

(ii) the amount described in paragraph 13.1.1(a).

An insurer acquiring a portfolio of life insurance contracts may use an expanded presentation described in paragraph 13.1.1.

The intangible assets described in paragraphs 13.1.1 and 13.1.2 are excluded from the scope of AASB 136 Impairment of Assets and from the scope of AASB 138 Intangible Assets in respect of recognition and measurement.  AASB 136 and AASB 138 apply to customer lists and customer relationships reflecting the expectation of future contracts that are not part of the contractual insurance rights and contractual insurance obligations that existed at the date of a business combination or portfolio transfer.

AASB 138 includes disclosure requirements in relation to this intangible asset.

Where a life insurer recognises an intangible asset under paragraph 13.1.1(b), this intangible asset is considered when performing the liability adequacy test referred to in paragraph 8.6.