The objective of this Standard is to specify requirements for the general purpose financial statements of superannuation entities with a view to providing users with information useful for decision making in a superannuation entity context.
Preamble
Pronouncement
This compiled Standard applies to annual periods beginning on or after 1 January 2020. Earlier application is permitted for annual periods beginning before 1 January 2020. It incorporates relevant amendments made up to and including 21 May 2019.
Prepared on 2 March 2020 by the staff of the Australian Accounting Standards Board.
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Copyright
© Commonwealth of Australia 2020
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Rubric
Australian Accounting Standard AASB 1056 Superannuation Entities (as amended) is set out in paragraphs 1 – 37 and Appendices A and B. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. Terms defined in Appendix A are in italics the first time they appear in the Standard. AASB 1056 is to be read in the context of other Australian Accounting Standards, including AASB 1048 Interpretation Standards, which identifies the Australian Accounting Interpretations, and AASB 1057 Application of Australian Accounting Standards.. In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.
Comparison with IAS 26
AASB 1056 Superannuation Entities as amended has been developed by the Australian Accounting Standards Board (AASB) to replace AAS 25 Financial Reporting by Superannuation Plans.
IAS 26 Accounting and Reporting by Retirement Benefit Plans was originally issued by the International Accounting Standards Committee in January 1987 and adopted by the International Accounting Standards Board in April 2001. When Australia first adopted International Financial Reporting Standards in 2005, AAS 25 was considered to be more appropriate for Australian superannuation entities than IAS 26. The AASB considers that the AASB’s reasons for not adopting IAS 26 remain valid in respect of AASB 1056. Those reasons are outlined in paragraphs BC7 to BC11 of the Basis for Conclusions.
The main differences between AASB 1056 and IAS 26 include the following.
(a) AASB 1056 requires the presentation of a comprehensive set of financial statements for superannuation entities, whether they constitute one or more superannuation plans and whether they have defined contribution members or defined benefit members, or both. In contrast IAS 26 requires a defined contribution plan to present a statement of net assets available for benefits, and permits a defined benefit plan to present either:
(i) a statement showing net assets available for benefits, an actuarial present value of promised retirement benefits, and a resulting excess or deficit; or
(ii) a statement of net assets available for benefits including either a note disclosing an actuarial present value of promised retirement benefits, or a reference to this information in an accompanying actuarial report;
(b) AASB 1056 requires most assets to be measured at fair value; whereas IAS 26 permits investment assets to be measured at an amount other than fair value when “an estimate of fair value is not possible”; and
(c) AASB 1056 requires measurement of defined benefit member liabilities to involve assumptions that would include projected salary levels; whereas IAS 26 permits the “actuarial present value of promised retirement benefits” to be based on either current or projected salary levels.
Accounting Standard AASB 1056
The Australian Accounting Standards Board made Accounting Standard AASB 1056 Superannuation Entities on 5 June 2014.
This compiled version of AASB 1056 applies to annual periods beginning on or after 1 January 2020. It incorporates relevant amendments contained in other AASB Standards made by the AASB up to and including 21 May 2019 (see Compilation Details).
Objective
1
The objective of this Standard is to specify requirements for the general purpose financial statements of superannuation entities with a view to providing users with information useful for decision making in a superannuation entity context.
AusCF1
AusCF paragraphs included in this Standard apply only to:
(a) not-for-profit entities; and
(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).
Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs.
Application
2
This Standard applies to:
(a) general purpose financial statements of each superannuation entity that is a reporting entity; and
(b) financial statements of a superannuation entity that are held out to be general purpose financial statements.
3
This Standard applies to annual reporting periods beginning on or after 1 July 2016.
4
This Standard may be applied to annual reporting periods beginning before 1 July 2016. When an entity applies this Standard to such an annual reporting period, it shall disclose that fact.
5
When applied or operative, this Standard supersedes AAS 25 Financial Reporting by Superannuation Plans as issued in March 1993 and amended to December 2013.
Compliance with Australian Accounting Standards
6
Unless otherwise specified in this Standard, the financial statements of a superannuation entity shall be prepared in accordance with other applicable Australian Accounting Standards.
7
Except in specified circumstances, this Standard requires a superannuation entity to apply other applicable Australian Accounting Standards. One of the main exceptions is to require most assets to be measured at fair value.
Presentation of Financial Statements
8
A superannuation entity shall present:
(a) a statement of financial position as at the end of the reporting period;
(b) an income statement for the period;
(c) a statement of changes in equity/reserves for the period;
(d) a statement of cash flows for the period;
(e) a statement of changes in member benefits for the period; and
(f) notes to the financial statements.
Income Statement
9
The income statement shall include line items that present, when applicable, the following amounts for the period:
(a) income, in aggregate or subclassified, subject to paragraph 10;
(b) expenses, in aggregate or subclassified, subject to paragraph 10;
(c) net benefits allocated to defined contribution member accounts;
(d) the net change in defined benefit member liabilities;
(e) net result, subject to paragraph 10; and
(f) income tax expense or benefit attributable to net result.
10
When a superannuation entity acts in the capacity of an insurer in respect of defined contribution members, the income statement or notes to the financial statements shall separately present insurance premiums, claim expenses, reinsurance expenses, reinsurance recoveries, and the net result from insurance activities.
Statement of Changes in Member Benefits
11
A statement of changes in member benefits shall present opening and closing balances for member liabilities and, when applicable, include the following line items for the period:
(a) employer contributions;
(b) member contributions;
(c) taxes on contributions;
(d) benefits transferred into the entity from other superannuation entities;
(e) benefits to members or their beneficiaries;
(f) insurance premiums charged to defined contribution member accounts;
(g) net benefits allocated to defined contribution member accounts;
(h) net changes to defined benefit member accrued benefits; and
(i) amounts allocated to members from reserves.
12
Current tax and deferred tax shall be charged or credited directly to member liabilities and presented in the statement of changes in member benefits when the tax relates to items that are credited or charged, in the same or a different period, directly to member liabilities.
Member Liabilities
Recognition
14
Obligations relating to member entitlements shall be recognised as member liabilities.
Measurement
15
Member liabilities shall be measured as the accrued benefits of members as set out in paragraphs 16 and 17.
16
Defined contribution member liabilities shall be measured as the amount of member account balances as at the reporting date.
17
Defined benefit member liabilities shall be measured as the amount of a portfolio of investments that would be needed as at the reporting date to yield future net cash inflows that would be sufficient to meet accrued benefits as at that date when they are expected to fall due.
Employer-sponsor receivables
Recognition
18
An asset relating to an employer-sponsor receivable shall be recognised to the extent there is a difference between a defined benefit member liability and the fair value of assets available to meet that liability that meets the definition and recognition criteria for an asset in the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).
AusCF18
Notwithstanding paragraph 18, in respect of AusCF entities, an asset relating to an employer-sponsor receivable shall be recognised to the extent there is a difference between a defined benefit member liability and the fair value of assets available to meet that liability that meets the definition and recognition criteria for an asset in the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards).
Measurement
19
An asset recognised in accordance with paragraph 18 shall be measured consistently with the measurement of defined benefit member liabilities less the relevant amount of the other recognised assets held to meet those liabilities.
Disclosure
20
Paragraph AG5 of Appendix B includes guidance on the approach to disclosure principles and requirements in other Australian Accounting Standards that a superannuation entity applies when relevant.
Nature of Member Benefits
21
A superannuation entity shall disclose information that provides users with a basis for understanding the benefits the entity provides to members. These disclosures shall include the types of benefits the superannuation entity provides and, when applicable, whether the superannuation entity can accept new defined benefit members.
Nature of Income and Expense Items
22
A superannuation entity shall disclose information that provides users with a basis for understanding the nature and amounts of income and expenses.
Member Liabilities
23
A superannuation entity shall disclose information that provides users with a basis for understanding member liabilities.
24
In relation to defined contribution member liabilities, to meet the objective in paragraph 23, when applicable, an entity:
(a) applies the disclosure requirements of AASB 7 Financial Instruments: Disclosures in respect of credit risk, market risk and liquidity risk, as if defined contribution member liabilities were financial liabilities; and
(b) discloses the amount of any net assets attributable to defined contribution members but not allocated to those members as at the end of the period.
25
In relation to defined benefit member liabilities, to meet the objective in paragraph 23, the disclosures would include:
(a) information in relation to the key assumptions used in measuring defined benefit member liabilities, including:
(i) the basis for the key assumptions, including the manner in which they have been determined;
(ii) the key assumptions used, as percentages or in other quantitative terms or in qualitative form; and
(iii) the sensitivity of the liabilities to reasonably possible changes in the key assumptions;
(b) the amount of vested benefits at the end of the period;
(c) whether the actual level of contributions is consistent with the actuary’s recommendations;
(d) information about the manner in which the entity manages liquidity risk; and
(e) where the entity’s actual investment portfolio differs from the portfolio used in measuring defined benefit member liabilities in accordance with paragraph 17, an explanation of why that is the case.
Employer-sponsor receivables
26
When an employer-sponsor receivable is recognised in accordance with paragraph 18, the main features of the specific contractual or statutory arrangement in place between the superannuation entity and the relevant employer-sponsor(s) shall be disclosed.
27
To meet the objective in paragraph 26, the disclosures would include:
(a) whether the arrangement is contractual or statutory and, in the latter case, the name of the statute;
(b) the identity of the employer-sponsor(s); and
(c) the manner in which the receivable is expected to be realised by the entity.
Net Assets Attributable to Defined Benefit Members
28
Where the amount of net assets attributable to defined benefit members differs from defined benefit member liabilities determined in accordance with this Standard, the entity shall disclose information that provides users with a basis for understanding the nature, causes of and any strategies for addressing the difference between the two amounts.
29
To meet the objective in paragraph 28, the disclosures would include:
(a) whether the difference has arisen, in whole or in part, as a consequence of applying different assumptions for the purposes of determining funding levels and measuring defined benefit member liabilities and, if so, the nature of the differences between the assumptions; and
(b) in the case of a difference not wholly explained by (a):
(i) the entity’s strategy for addressing the difference and the anticipated timeframe over which the difference is expected to be eliminated; and
(ii) any plans or processes in place for employer-sponsors to seek to be paid some or all of a surplus or to reduce the level of their contributions in the future.
Explaining Changes in Defined Benefit Member Liabilities
30
A superannuation entity shall disclose information that provides users with a basis for understanding the overall change in defined benefit member liabilities.
31
To meet the objective in paragraph 30, the disclosures would include quantitative or qualitative information about changes to key assumptions.
Disaggregated Financial Information
32
A superannuation entity shall disclose disaggregated information when it is necessary to explain the risks and benefit arrangements relating to different categories of members.
Insurance Arrangements
33
A superannuation entity acting in the capacity of an insurer shall:
(a) recognise liabilities and assets arising from its insurance and reinsurance arrangements;
(b) measure liabilities and assets arising from insurance and reinsurance arrangements using the approach to measuring defined benefit member liabilities; and
(c) if reinsurance assets are impaired, reduce the carrying amount of those assets and recognise the impairment in the income statement.
34
A reinsurance asset is impaired if, and only if:
(a) there is objective evidence, as a result of an event that occurred after initial recognition of the reinsurance asset, that the entity may not receive amounts due to it under the terms of the contract; and
(b) that event has a reliably measurable impact on the amounts that the entity will receive from the reinsurer.
35
A superannuation entity acting in the capacity of an insurer in respect of defined contribution members that recognises insurance liabilities and assets shall disclose information that provides a basis for understanding the amount, timing and uncertainty of future cash flows relating to those liabilities and assets.
36
To meet the objective in paragraph 35, the disclosures would include quantitative or qualitative information in relation to:
(a) key assumptions used in measuring liabilities arising from insurance arrangements the superannuation entity provides to its members;
(b) any uncertainties surrounding those key assumptions; and
(c) any uncertainties surrounding reinsurance assets.
Appendix A -- Defined Terms
This appendix is an integral part of AASB 1056.
accrued benefits
A[1]
Benefits the superannuation entity is presently obliged to transfer to members or their beneficiaries in the future as a result of membership up to the end of the reporting period.
approved deposit fund
A[2]
An entity that is an approved deposit fund within the meaning of section 10 of the Superannuation Industry (Supervision) Act 1993.
defined benefit member
A[3]
A member whose benefits are specified, or are determined, at least in part, by reference to a formula based on their years of membership and/or salary level.
Members identified as defined benefit members based on the definition in this Standard are not expected to be different from members identified as defined benefit members under prudential regulation.
defined contribution member
A[4]
A member whose benefits are determined by reference to accumulated contributions made on their behalf and/or by them, together with investment earnings thereon.
If an individual member’s benefit entitlements have characteristics of both defined benefit and defined contribution entitlements, the member is regarded as a defined benefit member for the purpose of this Standard.
superannuation entity
A[5]
An entity that constitutes one or more superannuation plan(s) or an approved deposit fund.
superannuation plan
A[6]
An entity that is:
(a) regulated under the Superannuation Industry (Supervision) Act 1993, or similar legislative requirements in the case of an exempt public sector superannuation plan; and
(b) established and maintained:
(i) in order to receive superannuation contributions; and
(ii) for the primary purpose of providing benefits to members upon their retirement, death, disablement or other event that qualifies as a condition of release for member benefits.
Superannuation plans may be constituted as separate entities or as a number of separate entities established to administer aspects of the plan (such as when one entity administers contributions and another administers benefit payments).
vested benefits
A[7]
The value of benefits to which members or their beneficiaries would be entitled on voluntary withdrawal from the superannuation entity or on becoming entitled to a pension or deferred benefit as at the end of the reporting period.
In the context of a defined benefit member’s vested benefits, withdrawal means withdrawal by a member from either the defined benefit section of their superannuation plan or withdrawal from the plan itself.
Appendix B -- Application Guidance
This appendix is an integral part of AASB 1056.
Definition of Superannuation Entity
AG1
This Standard applies to the general purpose financial statements of superannuation entities, as defined in Appendix A. The definition of ‘superannuation entity’ includes regulated superannuation funds under the Superannuation Industry (Supervision) Act 1993 (SIS Act). It also includes various public sector superannuation arrangements, but does not include pooled superannuation trusts. Accordingly the term has a different meaning in this Standard from its meaning in the SIS Act.
AG2
In some cases, entities administering superannuation arrangements, particularly in the public sector, would need to consider the nature of their activities and the boundaries of their arrangements to determine whether they are superannuation entities that would apply this Standard. They may instead be only custodial arrangements under which member liabilities rest directly and solely with employer-sponsors.
Compliance with Principles and Requirements in other Australian Accounting Standards (Paragraphs 6 and 7)
AG3
When the recognition, measurement and disclosure principles and requirements in this Standard address the same items or events as the recognition, measurement and disclosure principles and requirements in other Australian Accounting Standards, a superannuation entity need not apply those other Standards. For example, a superannuation entity applying this Standard would:
(a) measure financial assets at fair value and recognise fair value changes in the income statement and not apply AASB 9 Financial Instruments; which might otherwise require some financial assets to be measured at amortised cost or fair value through other comprehensive income; and
(b) disclose information about expenses in accordance with paragraphs 9 and 22 and need not disclose information in accordance with paragraphs 99-105 of AASB 101 Presentation of Financial Statements regarding an analysis of expenses.
AG4
Additionally, when the measurement principles in this Standard are different from the measurement principles in other Australian Accounting Standards, the disclosure requirements related to the measurement requirements in those other Australian Accounting Standards do not apply. For example, a superannuation entity that holds plant and equipment is not required to disclose the carrying amounts that would have been recognised had the assets been measured under the cost model in accordance with paragraph 77(e) of AASB 116 Property, Plant and Equipment.
AG5
When a superannuation entity applies the recognition and measurement principles and requirements in other Australian Accounting Standards, the entity would also apply any relevant disclosure principles and requirements contained in those other Standards unless they are specifically modified by this Standard. Australian Accounting Standards that contain disclosure principles and requirements, some or all of which a superannuation entity would apply, when relevant, include but are not limited to the following:
(a) AASB 7 Financial Instruments: Disclosures;[1]
(b) AASB 12 Disclosure of Interests in Other Entities;
(ba) AASB 15 Revenue from Contracts with Customers;
(c) AASB 101 Presentation of Financial Statements;
(d) AASB 107 Statement of Cash Flows;
(e) AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors;
(f) AASB 110 Events after the Reporting Period;
(g) AASB 112 Income Taxes;
(h) [deleted]
(i) AASB 124 Related Party Disclosures.
Although, refer to paragraph AG36 in respect of the fair value disclosure requirements of AASB 7.
AG6
When a superannuation entity applies other Australian Accounting Standards, the entity also applies relevant Australian Interpretations listed in AASB 1048 Interpretation of Standards.
Presentation of Financial Statements (Paragraphs 8 to 12)
AG7
Consistent with AASB 101, alternative titles can be used for the financial statements to suit the circumstances. For example, the statement of changes in equity might be better described as a statement of changes in reserves in some circumstances.
Statement of Financial Position
AG8
Where a superannuation entity’s total assets differs from its total liabilities (including defined contribution member liabilities, defined benefit member liabilities and any obligations to employer-sponsors), the difference is classified as equity and presented in accordance with applicable Australian Accounting Standards. In these circumstances, consistent with paragraph 55 of AASB 101, the entity may need to present additional line items, headings and subtotals in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position.
AG9
Differences between the total assets and total liabilities of a superannuation entity commonly arise in relation to matters such as operational risk reserves and, in respect of defined benefit members, due to factors such as differences between actual and assumed experience.
AG10
A superannuation entity that has both defined contribution and defined benefit members would present separately its obligations for the two types of benefits in accordance with paragraph 32.
AG11
Superannuation entities would be expected to present the various classes of their investments in a meaningful way, consistent with the requirements of AASB 101.
AG12
Judgement needs to be exercised in the context of a superannuation entity about how to describe investments presented in its statement of financial position so as to explain the nature of investments to users. For example, an investment in a unit trust might need to be described so as to reflect the nature of the assets underlying the unit trust.
Income Statement
AG13
Revenues and expenses are presented in relevant subclassifications in the income statement or notes to the financial statements.
AG14
Gains and losses arising from the remeasurement of assets and liabilities measured at fair value are included in the income statement. An example of a liability measured at fair value is a derivative financial instrument that is a liability.
AG15
The income tax expense or benefit attributable to profit or loss does not include the taxes levied on concessional contributions, which is included in the statement of changes in member benefits and impacts on the amount of net benefits allocated to members.
AG16
The net change in defined benefit member liabilities for a period is the difference between the opening and closing balances of the defined benefit member liabilities for the period, after adjusting for inwards and outwards movements, including:
(a) contributions;
(b) tax on contributions;
(c) benefits to members; and
(d) transfers between reserves and accrued benefits.
AG17
A superannuation entity that presents an income statement in accordance with this Standard does not present a single statement of comprehensive income, or separate income statement and statement of comprehensive income, in accordance with AASB 101.
Statement of Changes in Member Benefits
AG18
In the context of the line items that might appear in a statement of changes in member benefits in accordance with paragraph 11:
(a) employer contributions include both routine contributions and any ‘top-up’ contributions made to fund defined benefit member liabilities;
(b) net benefits allocated to defined contribution members include the investment returns and fair value movements allocated to these members – the line item might be positive or negative; and
(c) net changes to defined benefit members may include a number of components because the service element for a period might be different from actual contributions for that period and because of the interest cost associated with the liability – the line item might be positive or negative.
AG19
When a surplus in a defined benefit plan is being used to fund employer contributions to defined contribution members within the one superannuation entity, the entity determines the most relevant presentation in the statement of changes in member benefits in the circumstances. That might include presenting a transfer from defined benefit member benefits to defined contribution member benefits as separate line items in relation to sources of contributions.
AG20
In relation to the net amount allocated to defined contribution member accounts, when appropriate, there shall be separate disclosure of net investment income and the administration costs charged to member accounts in the statement of changes in member benefits or in the notes to the financial statements.
Statement of Changes in Equity/Reserves
AG21
Under this Standard, the interests of members of superannuation entities are liabilities and are not regarded as meeting the definition of an ‘equity instrument’ in paragraph 11 of AASB 132 Financial Instruments: Presentation, which is “any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities”. Superannuation entities would not disclose ‘equity’ information equivalent to that required by paragraphs 79(a) and 80 of AASB 101, in relation to member liabilities.
AG22
Paragraph 6 of AASB 101 notes: entities that do not have equity as defined in AASB 132 may need to adapt the financial statement presentation of members’ interests. Consistent with this notion, superannuation entities need to exercise judgement in preparing the statement of changes in equity/reserves, including the title and content of that statement.
Assets and Liabilities Measured at Fair Value (Paragraph 13)
AG23
This Standard requires assets and liabilities, other than member liabilities, tax assets and liabilities, acquired goodwill and insurance assets and liabilities, to be measured at fair value with fair value changes recognised through the income statement. This would include:
(a) financial assets and liabilities, including derivatives;
(b) investment property; and
(c) property, plant and equipment.
AG24
In determining the fair value measurements and accounting for any transaction costs, a superannuation entity applies the relevant principles and requirements in other applicable Australian Accounting Standards, including in particular AASB 13 Fair Value Measurement. Superannuation entities shall not apply AASB 5 Non-current Assets Held for Sale and Discontinued Operations.
Measurement of Defined Benefit Member Liabilities (Paragraph 17)
AG25
The amount of defined benefit member liabilities measured in accordance with paragraph 17 is a present value based on a portfolio of investments estimated to yield future net cash inflows that would be sufficient to meet accrued benefit payments when they are expected to fall due. In this context:
(a) the amount relates to members’ service up to the reporting date;
(b) it is assumed the accrued benefits will be fulfilled and, accordingly, there is no adjustment for the superannuation entity’s own credit risk;
(c) the expected cash outflows relevant to measuring the liability take into account the timing and probabilities attaching to various factors that reflect the characteristics of the members/beneficiaries and the features of entitlements (including expected rates of: member turnover; mortality and disability; salary adjustment; early retirement; and member choice of available options, such as lump sum and pension options). The relevant portfolio of investments would not necessarily be a portfolio of instruments that is expected to yield contractual net cash inflows that match the timing of the expected net cash outflows relating to the liability. It might be a portfolio that is expected to yield either contractual or non-contractual net cash inflows that match the timing of expected net cash outflows relating to the liability;
(d) the investment returns relevant to measuring the liability are those expected on a portfolio of investments that reflects the opportunities available in investment markets and not necessarily the actual investments held by the superannuation entity to meet accrued defined benefit member liabilities. Accordingly, the measurement is not dependent on whether the benefits are fully funded, under/over funded or completely unfunded. However, in many cases there would be a strong relationship between the portfolio of investments used for measurement purposes and, where relevant, the superannuation entity’s actual portfolio of investments, consistent with its investment strategy in respect of meeting defined benefit member liabilities;
(e) the accrued benefit amount might be more or less than the value of vested benefits; and
(f) the discount rate would exclude risks incorporated in the expected cash flows (to avoid ‘double-counting’ of the impacts of risks).
AG26
In applying the defined benefit member liability measurement requirements of this Standard, superannuation entities may use estimates, averages and computational shortcuts provided that application of those shortcut techniques yield a reasonable approximation of the defined benefit member liabilities.
Employer-sponsor Receivables (Paragraphs 18 and 19)
AG27
A specific contractual or statutory arrangement in place between the superannuation entity and the relevant employer-sponsor(s) in relation to funding defined benefit member liabilities might give rise to an asset recognised in accordance with paragraph 18.
AG28
A receivable meeting the definition and recognition criteria for an asset in the Conceptual Framework for Financial Reporting would be measured at its intrinsic value. That is, the difference between the defined benefit member liabilities and the amount of the other recognised assets held to meet those liabilities, unless the amount of the receivable is capped in some manner.
AusCFAG28
Notwithstanding paragraph AG28, in respect of AusCF entities, a receivable meeting the definition and recognition criteria for an asset in the Framework for the Preparation and Presentation of Financial Statements would be measured at its intrinsic value. That is, the difference between the defined benefit member liabilities and the amount of the other recognised assets held to meet those liabilities, unless the amount of the receivable is capped in some manner.
Disclosures (Paragraphs 20 to 32)
Nature of Income and Expense items
AG29
To meet the objectives in paragraph 22, when relevant, the superannuation entity discloses:
(a) income by class, such as interest, dividends and rentals;
(b) net gain or loss arising from the remeasurement of assets and liabilities measured at fair value;
(c) net gain or loss attributable to liabilities and assets arising from insurance arrangements the superannuation entity provides to its members;
(d) administration expenses;
(e) investment expenses, such as investment manager fees, investment consultant fees and custodian fees;
(f) actuarial fees;
(g) audit fees;
(h) commissions paid directly by the superannuation entity;
(i) trustee fees and reimbursements; and
(j) sponsorship and advertising expenses.
Member Liabilities
AG30
Paragraph 23 requires a superannuation entity to disclose information that provides users with a basis for understanding member liabilities. Paragraph 24(a) requires a superannuation entity to treat its defined contribution member liabilities as being within the scope of AASB 7 for the purposes of disclosing information about credit risk, market risk and liquidity risk. The fair value disclosure requirements of AASB 7 need not be applied in respect of member liabilities.
AG31
In applying the relevant principles and requirements of AASB 7 in respect of credit risk, market risk and liquidity risk, an entity would give consideration to the characteristics of member benefits in determining the information it would provide. For example, the entity would consider disclosing:
(a) the mechanism by which market risk is passed on to members, such as through frequent crediting of member accounts; and
(b) how it manages the liquidity risk associated with meeting withdrawals and, when relevant, pension payments.
AG32
Paragraph 25(a)(iii) identifies disclosure of the sensitivity of defined benefit member liabilities to changes in key assumptions used in their measurement as being required to meet the objective of paragraph 23. The subject of the disclosures is reasonably possible changes in the key assumptions. When there is more than one key assumption for which a change is judged to be reasonably possible, the analysis can be performed on a univariate basis or on a multivariate basis.
Disaggregated information
AG33
When a superannuation entity has multiple defined benefit plans, judgement needs to be applied to determine the most relevant levels of aggregation at which to disclose information, particularly where the information differs from plan to plan. Depending on the circumstances, the requirements might be able to be satisfied through aggregate disclosures about multiple plans or they might need to involve plan-by-plan disclosure.
AG34
In meeting the requirement in paragraph 32 to present disaggregated information, a superannuation entity that has material member liabilities relating to different types of members, such as defined contribution members and defined benefit members, would need to consider separately presenting:
(a) line items in the statement of financial position for each of the different membership types in respect of member liabilities; and
(b) either a single statement of changes in member benefits with columns or notes showing the amounts relating to different membership types or separate statements of changes in member benefits for each different type of members.
This would be in addition to presenting the aggregated information.
AG35
Depending on the circumstances of the superannuation entity, other disaggregated information might also be necessary to explain the risks to which different categories of members are exposed.
Financial Instruments
AG36
For the purpose of applying the disclosure principles and requirements in AASB 7, an entity would consider financial assets and any financial liabilities to be measured at fair value through profit or loss and, accordingly, the fair value disclosure requirements of AASB 7 need not be applied to these assets and liabilities.
Comparative Information
AG38
In complying with the comparative information requirements of AASB 101 a superannuation entity discloses:
(a) key assumptions used in measuring defined benefit member liabilities at the end of the last annual reporting period; and
(b) how, if at all, those assumptions differ from the corresponding key assumptions used in measuring defined benefit member liabilities at the end of the current period.
Related Parties
AG39
A trustee of a superannuation entity is a related party of the entity for the purpose of applying AASB 124.
Insurance Arrangements (Paragraphs 33 to 36)
AG40
Superannuation entities often have insurance arrangements in place for their members and the extent to which they affect the financial statements varies depending on the nature of those arrangements. Some superannuation entities act only as agents for external insurers. Other superannuation entities act in the capacity of insurers and, therefore, take on insurance risks.
AG41
Factors that might be considered in determining whether a superannuation entity is acting as an agent in respect of the insurance arrangements provided to members include:
(a) members (or their beneficiaries) will only receive insurance benefits if the external insurer/reinsurer pays claims;
(b) insurance premiums are only paid through the superannuation entity for administrative reasons; and
(c) insurance premiums are effectively set directly by reference to premiums set by an external insurer.
AG42
It is not necessarily indicative of a superannuation entity taking on the role of an insurer simply because:
(a) (group) insurance cover is taken out in the name of the superannuation entity trustee;
(b) claim benefits are paid to members (or their beneficiaries) via the superannuation entity; and
(c) ex gratia payments have occasionally been made by the trustees in respect of death and disability benefits.
Superannuation entities acting only as agents
AG43
When a superannuation entity is acting only as an agent for an external insurer, premiums are not revenues or expenses of the superannuation entity and do not give rise to insurance contract liabilities or reinsurance assets. However, the impacts on the financial statements could include:
(a) premium cash inflows collected from members and premium cash outflows paid to insurers in the statement of cash flows; and
(b) premiums charged to member accounts and insurance benefits paid to members via the superannuation entity in the statement of changes in member benefits.
Superannuation entities as insurers
AG44
When a superannuation entity is taking on the role of an insurer, the impacts on the financial statements could include:
(a) insurance contract revenue, incurred claims expense, reinsurance expense and reinsurance recoveries recognised in the income statement;
(b) insurance contract liabilities and reinsurance contract assets recognised in the statement of financial position; and
(c) insurance contract cash inflows, reinsurance contract cash outflows, claims cash outflows and reinsurance recoveries cash inflows recognised in the statement of cash flows.
AG45
Depending on the conditions set out in the relevant trust deed, defined benefit members or beneficiaries might be promised, for example, a lump sum benefit on retirement or resignation, a lump sum benefit on death or disablement, a pension on retirement for their remaining lifetime and/or a pension for the remaining lifetime of a spouse, and the pension may or may not be indexed in some way. The defined benefit member liability is effectively the sum of the expected values associated with the various ways in which members might be paid their benefits. It is relevant to consider the defined benefit member liability as a single item made up of inter-related components, rather than to seek to identify particular components for presentation purposes, such as an insurance component. Accordingly, liabilities and assets arising from insurance arrangements a superannuation entity provides to defined benefit members need not be presented as a separate liability in the statement of financial position. Furthermore, unless there are explicit direct premiums, claims, reinsurance premiums or claim recoveries relating to insurance risks, revenues and/or expenses relating to insurance arrangements a superannuation entity provides to defined benefit members need not be presented separately in the income statement or statement of changes in member benefits.
AG46
Liabilities arising from insurance arrangements a superannuation entity provides to defined contribution members shall be presented separately from the entity’s liabilities for such members’ benefits in the statement of financial position.
AG47
Assets arising from the reinsurance arrangements of a superannuation entity related to defined contribution members shall be presented separately.
AG48
Insurance contract liabilities and reinsurance contract assets are recognised and measured in accordance with the approach to measuring defined benefit member liabilities, whether they relate to defined contribution or defined benefit members. Shortcut techniques could be applied to measure insurance contract liabilities, for example, deferring and matching premiums over the period, provided the amount is not materially different from the amount that would be determined using the approach to measuring defined benefit member liabilities.
AG49
If a reinsurance asset is impaired, its carrying amount shall be reduced accordingly and an impairment expense recognised in the income statement. A reinsurance asset is impaired if, and only if:
(a) there is objective evidence, as a result of an event that occurred after initial recognition of the reinsurance asset, that the amounts due from the reinsurer may not be received under the terms of the contract; and
(b) that event has a reliably measurable impact on the amounts receivable from the reinsurer.
Preparation and Presentation of Consolidated Financial Statements
AG50
AASB 10 Consolidated Financial Statements, as amended by AASB 2013-5 Amendments to Australian Accounting Standards – Investment Entities, is applicable to periods beginning on or after 1 January 2014, and can be applied early.
AG51
AASB 10 is relevant for determining when consolidated financial statements must be presented. The AASB 2013-5 amendments provide an exception from consolidated financial statements for ‘investment entities’, which could include superannuation entities. The exception applies to all subsidiaries of investment entities, other than subsidiaries that provide services relating to the investment entity’s investment activities. A parent must account for its subsidiaries that are subject to the exception at fair value through profit or loss.
AG52
It is possible that now or in the future there may be superannuation entities that have subsidiaries and do not qualify to be treated as investment entities; or, that there are superannuation entities that qualify to be treated as investment entities and have subsidiaries that provide services relating to their investment activities. Such superannuation entities would:
(a) present consolidated financial statements in accordance with the requirements of AASB 10; and
(b) initially measure any non-controlling interests applying the fair value approach in accordance with AASB 3 Business Combinations at the subsidiary’s acquisition date and in accordance with AASB 10 at the end of each subsequent period.
Main Differences Between AASB 1056 and AAS 25
This summary accompanies, but is not part of, AASB 1056.
This summary highlights the main differences between AASB 1056 Superannuation Entities and its predecessor, AAS 25 Financial Reporting by Superannuation Plans.
Application of Australian Accounting Standards
AAS 25 required superannuation entities to apply, where appropriate, Australian Accounting Standards, but with some significant exceptions. AASB 1056 takes a similar approach, but is far more integrated with other Australian Accounting Standards (and therefore with International Financial Reporting Standards).
Under AAS 25, superannuation plans whose only assets (other than temporary deposits at call with a bank) are endowment, whole of life or other long-term insurance policies that match and fully guarantee the benefits to be paid to individual members were not required to comply with a number of the recognition, measurement and disclosure requirements of AAS 25 [paragraph 66]. The general purpose financial report of such plans needed only to report a limited amount of information.
No equivalent exemption is provided in AASB 1056.
Superannuation Entity Definition
AASB 1056 defines a ‘superannuation entity’ as an entity that constitutes one or more superannuation plan(s) or an approved deposit fund. A ‘superannuation plan’ is an entity that is:
(a) regulated under the Superannuation Industry (Supervision) Act 1993 or similar legislative requirements in the case of an exempt public sector superannuation plan; and
(b) established and maintained: (i) in order to receive superannuation contributions; and (ii) for the primary purpose of providing benefits to members upon their retirement, death, disablement or other event that qualifies as a condition of release for member benefits.
AAS 25 had a different definition; namely: an arrangement whereby it is agreed, between trustees and employers, employees or self-employed persons, that benefits be provided upon retirement of plan members or upon their resignation, death, disablement or other specified event(s).
However, the entities identified as having to apply AASB 1056 are not necessarily expected to differ from those identified as having to apply AAS 25.
Presentation of Financial Statements
AASB 1056 requires that superannuation entities present:
(a) a statement of financial position;
(b) an income statement;
(c) a statement of changes in equity/reserves;
(d) a statement of cash flows; and
(e) a statement of changes in member benefits.
AAS 25 required a defined contribution plan, and permitted a defined benefit plan, to present a statement of financial position, operating statement, and statement of cash flows. Alternatively, defined benefit plans could present a statement of net assets and a statement of changes in net assets.
Income Statement
Items AASB 1056 requires to be presented in the income statement include:
(a) income in aggregate or subclassified;
(b) expenses in aggregate or subclassified;
(c) net benefits allocated to defined contribution member accounts;
(d) net change in defined benefit member liabilities;
(e) net result; and
(f) income tax expense or benefit attributable to net result.
AASB 1056 treats contributions from employers and members and benefits to members as affecting member liabilities, not as income and expenses.
AAS 25 required changes in the net market value of assets and financial liabilities to be included as a component of income. Contributions from employers and members and benefits to members were accounted for as income and expenses.
Statement of Changes in Equity/Reserves
AASB 1056 envisages that a difference may exist between total assets and liabilities (including member liabilities and any obligations to employer-sponsors) in the nature of equity/reserves that would be presented in the statement of financial position, with changes from period to period presented in a statement of changes in equity/reserves.
AAS 25 did not explicitly address this topic.
Statement of Changes in Member Benefits
AASB 1056 requires a statement of changes in member benefits to be presented and that it includes:
(a) contributions, separately for employers and members;
(b) taxes on contributions;
(c) benefits to members;
(d) net benefits allocated to defined contribution members; and
(e) net changes to defined benefit member accrued benefits.
AAS 25 did not require presentation of a statement of changes in member benefits.
Assets and Liabilities Measured at Fair Value
AASB 1056 requires assets and liabilities to be measured at ‘fair value through profit or loss’ with specific exceptions. The exceptions include member liabilities and tax balances.
AAS 25 required assets and financial liabilities to be measured at ‘net market values’ with similar exceptions to those applying under AASB 1056.
Member Liabilities
AASB 1056 requires both defined contribution and defined benefit member liabilities to be recognised and measured as the amount of accrued benefits. The measurement principle in AASB 1056 for a defined benefit member liability is the amount of a portfolio of investments that would be needed as at the reporting date to yield future net cash inflows that would be sufficient to meet accrued benefits as at that date when they are expected to fall due.
AASB 1056 requires defined benefit member liabilities to be measured at each reporting date. However, AASB 1056 does not identify any particular methodologies that might be employed in measuring defined benefit member liabilities, for example, when an actuary is not engaged to conduct a full actuarial valuation, but notes that superannuation entities may use estimates, averages and computational shortcuts provided that any shortcut techniques used yield a reliable approximation of the defined benefit member liabilities.
AAS 25 required defined contribution member liabilities to be determined as the difference between assets and ‘other’ liabilities. It required defined benefit member liabilities to be determined as the present value of expected future payments (remeasured at least once each three years).
Employer-sponsor Receivables
AASB 1056 requires an asset to be recognised when there is a receivable from an employer-sponsor in respect of a difference between a defined benefit member liability and the fair value of assets available to meet that liability that meets the definition and recognition criteria for an asset. The asset is required to be measured at its ‘intrinsic value’ (the amount of the difference, unless capped). The requirement is expected to give rise to the recognition of an asset in only a limited number of cases.
AAS 25 did not address employer-sponsor receivables.
Disclosure
AASB 1056 has of a number of disclosure ‘principles’, including requiring the following disclosures:
(a) information that provides users with a basis for understanding the nature of the entity, the benefits provided to members and the expenses it incurs;
(b) information about changes in key components of defined benefit member liabilities that provides users with a basis for understanding the overall change;
(c) deeming defined contribution member liabilities to be within the scope of AASB 7 Financial Instruments: Disclosure in respect of credit risk, market risk and liquidity risk (but not the fair value disclosures);
(d) in relation to accrued defined benefit member liabilities, the basis for the assumptions used in measurement, including the manner in which they are determined, the impact of changes to demographic assumptions compared with changes in financial assumptions, and the sensitivity of the liabilities to reasonably possible changes in key assumptions;
(e) when net assets attributable to defined benefit members differs from defined benefit member liabilities, information explaining the policies for managing the difference; and
(f) disaggregated financial information where that would help to explain the risks to which different categories of members are exposed.
AAS 25 required some relatively specific disclosures regarding classes of assets, liabilities, investment revenue and expenses. Many of these related to member liabilities and would be captured in the statement of changes in member benefits required by AASB 1056.
Insurance Arrangements
Whether a superannuation entity has an obligation under insurance arrangements, or is only acting as an agent will depend on the nature of the arrangements. AASB 1056 requires that, when a superannuation entity is acting in the capacity of an insurer and has an obligation under insurance arrangements provided to members (whether defined contribution or defined benefit), any insurance contract liabilities and assets are measured in a manner consistent with the way in which defined benefit member liabilities are measured. In respect of defined contribution members, any insurance liabilities, assets, insurance premiums, claim expenses, reinsurance expenses and reinsurance recoveries would be shown separately in the statement of financial position, income statement, or notes to the financial statements. However, liabilities and assets arising from insurance arrangements a superannuation entity provides to defined benefit members need not be presented separately from the entity’s liabilities for such members’ benefits. Furthermore, unless there are explicit direct premiums, claims, reinsurance premiums or claim recoveries relating to insurance risks, revenues and/or expenses relating to insurance arrangements a superannuation entity provides to defined benefit members need not be presented separately.
AAS 25 did not address insurance arrangements provided to members other than in the context of providing an exemption from some of the requirements of AAS 25 for a plan that purchases insurance policies that match and guarantee benefits to members.
Consolidated Financial Statements
Consolidated financial statements are not explicitly addressed in AASB 1056. The requirements of AASB 10 Consolidated Financial Statements, as amended by AASB 2013-5 Amendments to Australian Accounting Standards – Investment Entities, would apply.
Consolidated financial statements were also not explicitly addressed in AAS 25 and the requirements in AASB 127 Consolidated and Separate Financial Statements and AASB 10 applied.[2]
AASB 10 is relevant for determining when a consolidation takes place. The AASB 2013-5 amendments provide an exception from consolidation for investment entities, which could include superannuation entities. The exception applies to all subsidiaries of investment entities except subsidiaries that provide services relating to the investment entity’s investment activities.
Illustrative examples
These illustrative examples accompany, but are not part of, AASB 1056.
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|
|
Page |
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I |
Example financial statements of a superannuation entity that has only defined contribution members |
24 – 27 |
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II |
Example financial statements of a (hybrid) superannuation entity that has both defined contribution and defined benefit members |
27 – 31 |
Illustrative Examples I and II provide examples of acceptable styles and formats for a superannuation entity that are consistent with the requirements of AASB 1056 Superannuation Entities. They are not comprehensive.
The styles and formats illustrated are not mandatory. Other styles and formats may be equally appropriate if they meet the requirements of AASB 1056 and other applicable Australian Accounting Standards.
For illustrative convenience, particular notes have been located next to the financial statements to which they most closely relate. Some of the information illustrated as appearing on the face of the financial statements could be disclosed in the notes, and some of the information illustrated as appearing in the notes could be shown on the face of the financial statements.
For simplicity of presentation, comparative information is not shown.
For the purposes of the examples, the following insurance arrangements are assumed.
· The superannuation entity with only defined contribution members has insurance arrangements that involve taking on insurance risk and the entity fully reinsures those risks, giving rise to both insurance liabilities and assets of the entity.
· The hybrid superannuation entity is acting as an agent in respect of the insurance arrangements it has in place for defined contribution members. These insurance arrangements do not give rise to insurance liabilities and assets of the entity. Some components of the benefits for defined benefit members are in the nature of insurance, but separate amounts are not presented in respect of those components.
Illustrative example I
As at 30 June 20XX, Defined Contribution Superannuation Plan (the Plan) has 425,301 members and is a public offer fund open to new members. The Plan is a defined contribution style plan and, as such, members’ accounts are credited or debited each year with contributions and a proportionate share of net investment income and expenses (including income tax expense) of the Plan.
Statement of Financial Position for Defined Contribution Superannuation Plan
as at 30 June 20XX
Note | $000 | |
Assets | ||
Cash | 240,510 | |
Receivables | 324,909 | |
Units in unlisted cash management trusts | 4,921,700 | |
Listed Australian shares held directly | 7,490,663 | |
Units in international share trusts | 3,944,033 | |
Units in unlisted property trusts | 1,269,828 | |
Australian fixed interest securities held directly | 4,212,948 | |
Overseas fixed interest securities held directly | 879,034 | |
Property held directly | 436,978 | |
Reinsurance assets | 6,458 | |
Deferred tax assets | 52,358 | |
Total assets | 23,779,419 | |
Liabilities | ||
Payables | (236,641) | |
Income tax payable | (148,561) | |
Deferred tax liabilities | (364,903) | |
Insurance liabilities | A | (6,519) |
Total liabilities excluding member benefits | (756,624) | |
Net assets available for member benefits | 23,022,795 | |
Member benefits | (22,965,083) | |
Total net assets | 57,712 | |
Equity | ||
Investment reserve | B | (1,655) |
Operational risk reserve | C | (56,057) |
Total equity | (57,712) |
Note A – Insurance contract liabilities
Members can elect to take out term life cover with the Plan up to a maximum of $500,000 per member. The Plan uses the services of an actuary to determine its insurance contract liabilities who bases the calculations on relevant industry-focused mortality tables and the entity’s own claims experience. The entity has reinsured all of its direct insurance risks with EFG Reinsurance (Australia).
Note B – Investment reserve
The investment reserve comprises the difference between the cumulative amount of investment income (net of investment expenses) allocated to members’ accounts compared to the cumulative investment income (net of investment expenses) earned.
Note C – Operational risk reserve
An operational risk reserve is required under Australian Prudential Regulation Authority Standards to maintain adequate financial resources to address potential losses arising from operational risks. The Trustee has assessed a reserve of approximately 0.25% of funds under management as being appropriate for the Plan.
Income Statement for Defined Contribution Superannuation Plan
for the year ended 30 June 20XX
Note | $000 | |
Superannuation activities | ||
Interest revenue – direct cash deposits | 8,152 | |
Distributions from cash management trusts | 211,534 | |
Interest from Australian securities held directly | 282,045 | |
Interest from overseas securities held directly | 66,283 | |
Dividend revenue – listed Australian shares held directly | 286,794 | |
Distributions from wholesale international share trusts | 99,325 | |
Net rentals from directly held property | 28,068 | |
Distributions from unlisted property trusts | 82,407 | |
Net remeasurement changes in assets measured at fair value | 1,903,074 | |
Total superannuation activities revenue | 2,967,682 | |
Investment expenses | (55,972) | |
Administration expenses | (41,662) | |
Other operating expenses | E | (1,642) |
Total expenses | (99,276) | |
Net income from superannuation activities | 2,868,406 | |
Net loss from insurance activities | F | (36) |
Profit from operating activities | 2,868,370 | |
Less: Net benefits allocated to members’ accounts | (2,635,776) | |
Profit before income tax | 232,594 | |
Income tax expense | (235,553) | |
Loss after income tax | (2,959) |
Note D – Total revenue | $000 |
Superannuation activities revenue | 2,967,682 |
Insurance contract revenue | 77,810 |
3,045,492 |
Note E – Other operating expenses | $000 |
Trustee fees | (298) |
Commissions paid directly | (323) |
Audit fees | (309) |
Advertising and sponsorship | (712) |
Other operating expenses | (1,642) |
Note F – Insurance activities | $000 |
|
|
Insurance contract revenue | 77,810 |
Less: Outwards reinsurance premiums | (77,806) |
Net premium revenue | 4 |
Reinsurance recoveries revenues | 23,219 |
Insurance contract claims expenses | (22,833) |
Movement in insurance liabilities | (1,059) |
Movement in reinsurance assets | 633 |
Net loss from insurance activities | (36) |
Statement of Changes in Member Benefits for Defined Contribution Superannuation Plan
for the year ended 30 June 20XX
$000 | |||
|---|---|---|---|
Opening balance of member benefits | 18,014,382 | ||
Contributions: | |||
Employer | 2,622,940 | ||
Member | 241,812 | ||
Transfers from other superannuation plans | 704,162 | ||
Government co-contributions | 27,746 | ||
Income tax on contributions (refer Note G) | (416,373) | ||
Net after tax contributions | 3,180,287 | ||
Benefits to members | (811,432) | ||
Insurance premiums charged to members’ accounts | (77,810) | ||
Death and disability benefits credited to members’ accounts | 23,880 | ||
Benefits allocated to members’ accounts, comprising: | |||
Net investment income | 2,677,097 | ||
Administration fees | (41,321) | 2,635,776 | |
Closing balance of member benefits | 22,965,083 | ||
Note G – Income tax on contributions | $000 |
Contributions tax | (415,616) |
Contributions surcharge | (757) |
(416,373) |
Statement of Changes in Reserves for Defined Contribution Superannuation Plan
for the year ended 30 June 20XX
Unallocated surplus/ (deficiency) | Investment reserve | Operational risk | Total equity | |
$000 | $000 | $000 | $000 | |
Opening balance | – | 3,330 | 57,341 | 60,671 |
Profit/(Loss) for period | (2,959) | – | – | (2,959) |
Net transfers to/from reserves | 2,959 | (1,675) | (1,284) | – |
Closing balance | – | 1,655 | 56,057 | 57,712 |
Statement of Cash Flows for Defined Contribution Superannuation Plan
for the year ended 30 June 20XX
$000 | |
|---|---|
Cash flows from operating activities | |
Interest from cash deposits and cash management trusts | 189,667 |
Interest on Australian fixed interest securities held directly | 310,760 |
Interest on overseas fixed interest securities held directly | 27,819 |
Dividends from listed Australian shares held directly | 267,104 |
Net rentals from property held directly | 25,982 |
Unlisted property trust distributions | 83,691 |
Insurance premiums (inwards) | 77,810 |
Reinsurance recoveries | 22,016 |
Other income | 3,785 |
Administration expenses | (42,846) |
Investment expenses | (55,094) |
Reinsurance premiums (outward) | (77,270) |
Other expenses | (693) |
Income tax paid | (134,470) |
Net cash inflows from operating activities | 698,261 |
Cash flows from investing activities | |
Proceeds from sales of units in unlisted cash management trusts | 680,654 |
Proceeds from sales of shares in Australian listed corporations | 803,730 |
Proceeds from sales of units in wholesale international share trusts | 845,218 |
Proceeds from sales of overseas fixed interest securities | 444,826 |
Proceeds from sales of units in unlisted property trusts | 259,428 |
Purchases of units in unlisted cash management trusts | (1,285,930) |
Purchases of Australian fixed interest securities | (498,898) |
Purchases of shares in Australian listed corporations | (944,767) |
Purchases of units in wholesale international share trusts | (2,684,406) |
Purchases of units in unlisted property trusts | (517,326) |
Purchases of other assets | (201) |
Net cash outflows from investing activities | (2,897,672) |
Cash flows from financing activities | |
Employer contributions | 2,554,872 |
Member contributions | 235,548 |
Transfers from other superannuation plans received | 704,162 |
Government co-contributions received | 27,746 |
Benefits paid to members | (807,070) |
Income tax paid on contributions received | (407,417) |
Contributions surcharge tax paid | (674) |
Net cash inflows from financing activities | 2,307,167 |
Net increase in cash | 107,756 |
Cash at the beginning of the financial period | 132,754 |
Cash at the end of the financial period | 240,510 |
Illustrative example II
As at 30 June 20XX, Hybrid Superannuation Plan (the Plan) has 51,109 defined contribution members and 23,918 defined benefit members. The defined contribution part of the Plan is open to new members. All four of the defined benefit plans in the Plan are closed to new members. The defined contribution members have accounts that are credited or debited each year with contributions and a proportionate share of net investment income and expenses (including income tax expense) of the Plan. The defined benefit members have promised benefits that are determined on the basis of various formulae based on members’ salaries in the final years before they retire.
Statement of Financial Position for Hybrid Superannuation Plan
as at 30 June 20XX
|
|
Note |
$000 |
|
Assets |
|
|
|
Cash |
|
467,803 |
|
Receivables |
|
210,980 |
|
Shares in Australian listed corporations held directly |
|
2,788,084 |
|
Units in international shares trusts |
|
621,631 |
|
Fixed interest securities held directly |
|
3,214,391 |
|
Investment-linked insurance contracts |
|
289,148 |
|
Unlisted property trusts |
|
1,918,116 |
|
Derivatives |
|
32,328 |
|
Deferred tax assets |
|
38,333 |
|
Other assets |
|
5,345 |
|
Total assets |
|
9,586,159 |
|
|
|
|
|
Liabilities |
|
|
|
Benefits payable |
|
(148,058) |
|
Other payables |
|
(42,347) |
|
Income tax payable |
|
(202,812) |
|
Deferred tax liabilities |
|
(797) |
|
Total liabilities excluding member benefits |
|
(394,014) |
|
|
|
|
|
Net assets available for member benefits |
|
9,192,145 |
|
Defined contribution member liabilities |
A |
(2,258,229) |
|
Defined benefit member liabilities |
B |
(6,954,622) |
|
Total net liabilities |
|
(20,706) |
|
|
|
|
|
Equity |
|
|
|
Operational Risk Reserve |
C |
(25,895) |
|
Investment reserve |
D |
(2,980) |
|
Defined benefits that are (over) or under funded |
E |
49,581 |
|
Total equity |
|
20,706 |
Note A – Defined contribution member liabilities
Defined contribution members bear the investment risk relating to the underlying assets and unit prices used to measure defined contribution member liabilities. Unit prices are updated each day for movements in investment markets. Hybrid Superannuation Plan manages market risks, including foreign exchange rate risk, interest rate risk, commodity price risk and equity price risk by obtaining exposure to major asset classes through investment managers with highly-diversified portfolios.
The credit risk on investments in bonds and similar interest-bearing instruments is managed by selecting relevant fund managers that have well-established frameworks and supporting policies for managing credit risk across their portfolios. Those policies include managing concentration of credit risks and managing the balance between secured and unsecured debt.
The Plan closely monitors the inflows of contributions and the withdrawals from its various superannuation plans with a view to maintaining an adequate balance of liquid assets at all times to facilitate paying benefits to any exiting members within the statutory timelines.
Note B – Defined benefit member liabilities
In aggregate for the Plan’s four defined benefit superannuation plans, there were no unexpected events that changed defined benefit member liabilities materially. In line with general market expectations, discount rates are slightly higher at the current reporting date compared with the previous reporting date across all four plans, which had the effect of reducing defined benefit member liabilities. The Plan has no information that would lead it to adjust the assumptions around salary adjustment rates, pension index rates, resignations and mortality, which are all unchanged from the previous reporting period.
The Plan engages qualified actuaries on an annual basis to measure the defined benefit member liabilities in each of its four defined benefit plans. The Plan uses sensitivity analysis to monitor the potential impact of changes to key variables about which assumptions need to be made. The Plan has identified two assumptions (discount rate and rate of salary adjustment) for which changes are reasonably possible that would have a material impact on the amount of the liabilities.
The assumed discount rate for the four plans has been determined by reference to the investment returns expected on the investment portfolio that reflects the opportunities reasonably available to the Plan in investment markets, which also reflects the Plan’s actual investments and investment strategy in respect of defined benefit member liabilities. The assumed discount rate is the same for each of the four defined benefit plans.
Defined member benefits in each of the Plan’s four plans are based on an average of each member’s salary at specified anniversary dates in each of the last three years of their expected membership of their plan. The assumed annual salary adjustments for each of the entity’s four plans has been determined by reference to the Wage Price Index produced by the Australian Bureau of Statistics and in consultation with the employer-sponsors. The rate is the same for each of the ABC, OPQ and RST defined benefit plans. XYZ members are in an industry that is expected to experience generally higher than average salary adjustments.
The other variables about which assumptions have been made in measuring defined benefit member liabilities and for which changes are not considered reasonably possible, or for which reasonably possible changes would not be expected to have a material effect, include: pension index rates, mortality rates and resignations.
The following are sensitivity calculations on a univariate basis for the discount rate and rate of salary adjustment assumptions for the XYZ defined benefit plan and for the ABC, OPQ and RST defined benefit plans in aggregate.
|
Assumption for XYZ plan |
Assumed at reporting date |
Reasonably possible change |
Amount of (increase) decrease in member benefit liability – $000 |
|
Discount rate |
5.0% |
+0.5% –0.5% |
2,280 (2,549) |
|
Salary adjustment rate |
4.0% |
+1.0% –1.0% |
(3,001) 3,350 |
|
Assumption for ABC, OPQ and RST plans |
Assumed at reporting date |
Reasonably possible change |
Amount of (increase) decrease in member benefit liability – $000 |
|
Discount rate |
5.0% |
+0.5% –0.5% |
4,378 (4,809) |
|
Salary adjustment rate |
3.0% |
+1.0% –1.0% |
(5,762) 6,143 |
Note C – Operational risk reserve
The Trustee has assessed an operational risk reserve of approximately 0.25% of funds under management as appropriate for the Plan in respect of both defined contribution member interests and defined benefit member interests.
|
Operational risk reserve |
$000 |
|
|
|
|
Defined contribution membership |
5,657 |
|
Defined benefit membership |
20,238 |
|
|
25,895 |
Note D – Investment reserve
The Investment reserve comprises the difference between the cumulative amount of investment income (net of investment expenses) allocated to members’ accounts compared with the cumulative investment income (net of investment expenses) earned.
Note E – Defined benefit plans that are (over) or under funded
|
|
Note |
$000 |
|
|
|
|
|
ABC |
F |
2,316 |
|
OPQ |
G |
(2,589) |
|
RST |
H |
42,897 |
|
XYZ |
H |
6,957 |
|
|
|
49,581 |
Note F – plan ABC
Based on the existing contribution rate of the employer-sponsor of plan ABC, member benefits are projected, based on current assumptions, to be fully funded within the next two financial years.
Note G – plan OPQ
The employer-sponsor of plan OPQ intends to reduce contributions to the minimum amount required to meet its superannuation guarantee obligations, which is projected, based on current assumptions, to eliminate the surplus to zero within three years.
Note H – plans RST and XYZ
The employer-sponsors of plans RST and XYZ intend to increase their contributions for a period of three financial years to a level that is projected, based on current assumptions, to result in member liabilities being fully funded by the end of those three years.
Note I – Net assets attributable to defined benefit members
In respect of all four defined benefit plans, the entity has worked with the relevant employer-sponsors to develop a contributions strategy to fund the deficits that exist in three of the plans (ABC, RST and XYZ) and use up the surplus in one of the plans (OPQ). At the current rate of contributions from those employer-sponsors, each plan that currently has a deficit of liabilities over assets is scheduled to be fully funded within three years, and the plan that currently has a surplus is scheduled to be in balance within two years.
Income Statement for Hybrid Superannuation Plan
for the year ended 30 June 20XX
|
|
Note |
$000 |
|
Superannuation activities |
|
|
|
Interest revenue |
|
190,696 |
|
Dividend revenue – listed Australian shares held directly |
|
91,338 |
|
Distributions from wholesale international share trusts |
|
12,881 |
|
Unlisted property trust distributions |
|
261,878 |
|
Other income |
|
1,496 |
|
Net remeasurement changes in assets measured at fair value |
|
170,804 |
|
Total revenue |
|
729,093 |
|
|
|
|
|
Investment expenses |
|
(27,404) |
|
Administration expenses |
|
(12,042) |
|
Other operating expenses |
J |
(998) |
|
Total expenses |
|
(40,444) |
|
|
|
|
|
Operating result |
|
688,649 |
|
Net benefits allocated to defined contribution member accounts |
|
(142,293) |
|
Net change in defined benefit member benefits |
|
(580,138) |
|
Operating result before income tax expense |
|
(33,782) |
|
Income tax expense |
|
(38,470) |
|
Operating result after income tax |
|
(72,252) |
|
Note J – Other operating expenses |
$000 |
|
|
|
|
Trustee fees |
(198) |
|
Actuarial fees |
(272) |
|
Audit fees |
(216) |
|
Commissions paid directly |
(123) |
|
Advertising and sponsorship |
(189) |
|
Other operating expenses |
(998) |
Statement of Changes in Member Benefits for Hybrid Superannuation Plan
for the year ended 30 June 20XX
|
|
DC member benefits |
DB member benefits |
|
|
|
|
$000 |
$000 |
$000 |
|
|
Opening balance |
2,185,275 |
6,555,825 |
8,741,100 |
|
|
Employer contributions |
127,355 |
349,814 |
477,169 |
|
|
Member contributions |
17,717 |
93,153 |
110,870 |
|
|
Transfers from other super entities |
29,987 |
– |
29,987 |
|
|
Transfers to other super entities |
(40,737) |
– |
(40,737) |
|
|
Income tax on contributions |
(20,148) |
(66,445) |
(86,593) |
|
|
Net after tax contributions |
114,174 |
376,522 |
490,696 |
|
|
|
|
|
|
|
|
Benefits to members |
(187,093) |
(561,278) |
(748,371) |
|
|
Insurance premiums charged to members |
(105) |
(312) |
(417) |
|
|
Death / disability benefits credited |
1,233 |
3,699 |
4,932 |
|
|
Reserve transfers to (from) members: |
|
|
|
|
|
Investment reserves |
1,239 |
– |
1,239 |
|
|
Operational risk reserves |
1,213 |
28 |
1,241 |
|
|
Net benefits allocated, comprising: |
|
|
|
|
|
Net investment income |
145,701 |
|
|
|
|
Net administration fees |
(3,408) |
142,293 |
– |
142,293 |
|
Net change in DB member benefits |
– |
580,138 |
580,138 |
|
|
Closing balance |
2,258,229 |
6,954,622 |
9,212,851 |
|
Statement of Changes in Reserves for Hybrid Superannuation Plan
for the year ended 30 June 20XX
|
|
Note E |
Operational risk Note C |
Unallocated |
equity |
|
|
$000 |
$000 |
$000 |
$000 |
|
Opening balance |
4,219 |
27,136 |
22,671 |
54,026 |
|
Transfers to DC member accounts |
(1,239) |
(1,213) |
– |
(2,452) |
|
Transfers to DB member accounts |
– |
(28) |
– |
(28) |
|
Operating result |
– |
– |
(72,252) |
(72,252) |
|
Closing balance |
2,980 |
25,895 |
(49,581) |
(20,706) |
Statement of Cash Flows for Hybrid Superannuation Plan
for the year ended 30 June 20XX
|
|
$000 |
|
Cash flows from operating activities |
|
|
Interest on cash deposits and debt securities |
128,368 |
|
Dividends from Australian listed corporations |
210,250 |
|
Distributions from international share trusts |
12,981 |
|
Insurance premiums |
4,558 |
|
Other income |
1,295 |
|
Administration expenses |
(11,289) |
|
Investment expenses |
(26,560) |
|
Other expenses |
(714) |
|
Income tax |
(98,299) |
|
Net cash inflows (outflows) from operating activities |
220,590 |
|
|
|
|
Cash flows from investing activities |
|
|
Sales of shares in Australian listed corporations |
601,110 |
|
Sales of fixed interest securities |
128,908 |
|
Sales of derivatives |
4,219 |
|
Sales of investment-linked insurance contracts |
530,886 |
|
Purchases of shares in Australian listed corporations |
(842,316) |
|
Purchases of fixed interest securities |
(179,108) |
|
Net cash inflows (outflows) from investing activities |
243,699 |
|
|
|
|
Cash flows from financing activities |
|
|
Employer contributions |
487,185 |
|
Member contributions |
110,870 |
|
Transfers from other superannuation entities |
29,428 |
|
Transfers to other superannuation entities |
(41,436) |
|
Benefit payments to members |
(769,353) |
|
Tax paid on contributions |
(89,224) |
|
Net cash inflows from financing activities |
(272,530) |
|
|
|
|
Net increase in cash |
191,759 |
|
Cash at the beginning of the financial period |
276,044 |
|
Cash at the end of the financial period |
467,803 |
Compilation details
Accounting Standard AASB 1056 Superannuation Entities (as amended)
Compilation details are not part of AASB 1056.
This compiled Standard applies to annual periods beginning on or after 1 January 2020. It takes into account amendments up to and including 21 May 2019 and was prepared on 2 March 2020 by the staff of the Australian Accounting Standards Board (AASB).
This compilation is not a separate Accounting Standard made by the AASB. Instead, it is a representation of AASB 1056 (June 2014) as amended by other Accounting Standards, which are listed in the Table below.
Table of Standards
Table of amendments
