Recognition and presentation in the statement(s) of financial performance (paragraphs B120–B136) (AASB17_07-17_COMPdec22_01-23)

Applying paragraphs 41 and 42, an entity shall disaggregate the amounts recognised in the statement(s) of profit or loss and other comprehensive income (hereafter referred to as the statement(s) of financial performance) into:

(a)            an insurance service result (paragraphs 83–86), comprising insurance revenue and insurance service expenses; and

(b)            insurance finance income or expenses (paragraphs 87–92).

An entity is not required to disaggregate the change in the risk adjustment for non-financial risk between the insurance service result and insurance finance income or expenses. If an entity does not make such a disaggregation, it shall include the entire change in the risk adjustment for non-financial risk as part of the insurance service result.

An entity shall present income or expenses from reinsurance contracts held separately from the expenses or income from insurance contracts issued.

An entity shall present in profit or loss insurance revenue arising from the groups of insurance contracts issued. Insurance revenue shall depict the provision of services arising from the group of insurance contracts at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those services. Paragraphs B120–B127 specify how an entity measures insurance revenue.

An entity shall present in profit or loss insurance service expenses arising from a group of insurance contracts issued, comprising incurred claims (excluding repayments of investment components), other incurred insurance service expenses and other amounts as described in paragraph 103(b).

Insurance revenue and insurance service expenses presented in profit or loss shall exclude any investment components. An entity shall not present premium information in profit or loss if that information is inconsistent with paragraph 83.

An entity may present the income or expenses from a group of reinsurance contracts held (see paragraphs 60–70A), other than insurance finance income or expenses, as a single amount; or the entity may present separately the amounts recovered from the reinsurer and an allocation of the premiums paid that together give a net amount equal to that single amount. If an entity presents separately the amounts recovered from the reinsurer and an allocation of the premiums paid, it shall:

(a)            treat reinsurance cash flows that are contingent on claims on the underlying contracts as part of the claims that are expected to be reimbursed under the reinsurance contract held;

(b)            treat amounts from the reinsurer that it expects to receive that are not contingent on claims of the underlying contracts (for example, some types of ceding commissions) as a reduction in the premiums to be paid to the reinsurer;

(ba)            treat amounts recognised relating to recovery of losses applying paragraphs 66(c)(i)‒(ii) and 66A‒66B as amounts recovered from the reinsurer; and

(c)            not present the allocation of premiums paid as a reduction in revenue.

Insurance finance income or expenses comprises the change in the carrying amount of the group of insurance contracts arising from:

(a)            the effect of the time value of money and changes in the time value of money; and

(b)            the effect of financial risk and changes in financial risk; but

(c)            excluding any such changes for groups of insurance contracts with direct participation features that would adjust the contractual service margin but do not do so when applying paragraphs 45(b)(ii), 45(b)(iii), 45(c)(ii) or 45(c)(iii). These are included in insurance service expenses.

An entity shall apply:

(a)            paragraph B117A to insurance finance income or expenses arising from the application of paragraph B115 (risk mitigation); and

(b)            paragraphs 88 and 89 to all other insurance finance income or expenses.

In applying paragraph 87A(b), unless paragraph 89 applies, an entity shall make an accounting policy choice between:

(a)            including insurance finance income or expenses for the period in profit or loss; or

(b)            disaggregating insurance finance income or expenses for the period to include in profit or loss an amount determined by a systematic allocation of the expected total insurance finance income or expenses over the duration of the group of contracts, applying paragraphs B130–B133.

In applying paragraph 87A(b), for insurance contracts with direct participation features, for which the entity holds the underlying items, an entity shall make an accounting policy choice between:

(a)            including insurance finance income or expenses for the period in profit or loss; or

(b)            disaggregating insurance finance income or expenses for the period to include in profit or loss an amount that eliminates accounting mismatches with income or expenses included in profit or loss on the underlying items held, applying paragraphs B134–B136.

If an entity chooses the accounting policy set out in paragraph 88(b) or in paragraph 89(b), it shall include in other comprehensive income the difference between the insurance finance income or expenses measured on the basis set out in those paragraphs and the total insurance finance income or expenses for the period.

If an entity transfers a group of insurance contracts or derecognises an insurance contract applying paragraph 77:

(a)            it shall reclassify to profit or loss as a reclassification adjustment (see AASB 101 Presentation of Financial Statements) any remaining amounts for the group (or contract) that were previously recognised in other comprehensive income because the entity chose the accounting policy set out in paragraph 88(b).

(b)            it shall not reclassify to profit or loss as a reclassification adjustment (see AASB 101) any remaining amounts for the group (or contract) that were previously recognised in other comprehensive income because the entity chose the accounting policy set out in paragraph 89(b).

Paragraph 30 requires an entity to treat an insurance contract as a monetary item under AASB 121 for the purpose of translating foreign exchange items into the entity’s functional currency. An entity includes exchange differences on changes in the carrying amount of groups of insurance contracts in the statement of profit or loss, unless they relate to changes in the carrying amount of groups of insurance contracts included in other comprehensive income applying paragraph 90, in which case they shall be included in other comprehensive income.