Disclosure (AASB4_08-15_COMPsep20_01-21)

An insurer shall disclose information that identifies and explains the amounts in its financial statements arising from insurance contracts.

To comply with paragraph 36, an insurer shall disclose:

(a) its accounting policies for insurance contracts and related assets, liabilities, income and expense.

(b) the recognised assets, liabilities, income and expense (and, if it presents its statement of cash flows using the direct method, cash flows) arising from insurance contracts. Furthermore, if the insurer is a cedant, it shall disclose:

(i) gains and losses recognised in profit or loss on buying reinsurance; and

(ii) if the cedant defers and amortises gains and losses arising on buying reinsurance, the amortisation for the period and the amounts remaining unamortised at the beginning and end of the period.

(c) the process used to determine the assumptions that have the greatest effect on the measurement of the recognised amounts described in (b). When practicable, an insurer shall also give quantified disclosure of those assumptions.

(d) the effect of changes in assumptions used to measure insurance assets and insurance liabilities, showing separately the effect of each change that has a material effect on the financial statements.

(e) reconciliations of changes in insurance liabilities, reinsurance assets and, if any, related deferred acquisition costs.

An insurer shall disclose information that enables users of its financial statements to evaluate the nature and extent of risks arising from insurance contracts.

To comply with paragraph 38, an insurer shall disclose:

(a) its objectives, policies and processes for managing risks arising from insurance contracts and the methods used to manage those risks.

(b) [deleted]

(c) information about insurance risk (both before and after risk mitigation by reinsurance), including information about:

(i) sensitivity to insurance risk (see paragraph 39A).

(ii) concentrations of insurance risk, including a description of how management determines concentrations and a description of the shared characteristic that identifies each concentration (eg type of insured event, geographical area, or currency).

(iii) actual claims compared with previous estimates (ie claims development). The disclosure about claims development shall go back to the period when the earliest material claim arose for which there is still uncertainty about the amount and timing of the claims payments, but need not go back more than ten years. An insurer need not disclose this information for claims for which uncertainty about the amount and timing of claims payments is typically resolved within one year.

(d) information about credit risk, liquidity risk and market risk that paragraphs 31–42 of AASB 7 would require if the insurance contracts were within the scope of AASB 7. However:

(i) an insurer need not provide the maturity analyses required by paragraph 39(a) and (b) of AASB 7 if it discloses information about the estimated timing of the net cash outflows resulting from recognised insurance liabilities instead. This may take the form of an analysis, by estimated timing, of the amounts recognised in the statement of financial position.

(ii) if an insurer uses an alternative method to manage sensitivity to market conditions, such as an embedded value analysis, it may use that sensitivity analysis to meet the requirement in paragraph 40(a) of AASB 7. Such an insurer shall also provide the disclosures required by paragraph 41 of AASB 7.

(e) information about exposures to market risk arising from embedded derivatives contained in a host insurance contract if the insurer is not required to, and does not, measure the embedded derivatives at fair value.

To comply with paragraph 39(c)(i), an insurer shall disclose either (a) or (b) as follows:

(a) a sensitivity analysis that shows how profit or loss and equity would have been affected if changes in the relevant risk variable that were reasonably possible at the end of the reporting period had occurred; the methods and assumptions used in preparing the sensitivity analysis; and any changes from the previous period in the methods and assumptions used. However, if an insurer uses an alternative method to manage sensitivity to market conditions, such as an embedded value analysis, it may meet this requirement by disclosing that alternative sensitivity analysis and the disclosures required by paragraph 41 of AASB 7.

(b) qualitative information about sensitivity, and information about those terms and conditions of insurance contracts that have a material effect on the amount, timing and uncertainty of the insurer’s future cash flows.

An insurer that elects to apply the temporary exemption from AASB 9 shall disclose information to enable users of financial statements:

(a) to understand how the insurer qualified for the temporary exemption; and

(b) to compare insurers applying the temporary exemption with entities applying AASB 9.

To comply with paragraph 39B(a), an insurer shall disclose the fact that it is applying the temporary exemption from AASB 9 and how the insurer concluded on the date specified in paragraph 20B(b) that it qualifies for the temporary exemption from AASB 9, including:

(a) if the carrying amount of its liabilities arising from contracts within the scope of this Standard (ie those liabilities described in paragraph 20E(a)) was less than or equal to 90 per cent of the total carrying amount of all its liabilities, the nature and carrying amounts of the liabilities connected with insurance that are not liabilities arising from contracts within the scope of this Standard (ie those liabilities described in paragraphs 20E(b) and 20E(c));

(b) if the percentage of the total carrying amount of its liabilities connected with insurance relative to the total carrying amount of all its liabilities was less than or equal to 90 per cent but greater than 80 per cent, how the insurer determined that it did not engage in a significant activity unconnected with insurance, including what information it considered; and

(c) if the insurer qualified for the temporary exemption from AASB 9 on the basis of a reassessment applying paragraph 20G(b):

(i) the reason for the reassessment;

(ii) the date on which the relevant change in its activities occurred; and

(iii) a detailed explanation of the change in its activities and a qualitative description of the effect of that change on the insurer’s financial statements.

If, applying paragraph 20G(a), an entity concludes that its activities are no longer predominantly connected with insurance, it shall disclose the following information in each reporting period before it begins to apply AASB 9:

(a) the fact that it no longer qualifies for the temporary exemption from AASB 9;

(b) the date on which the relevant change in its activities occurred; and

(c) a detailed explanation of the change in its activities and a qualitative description of the effect of that change on the entity’s financial statements.

To comply with paragraph 39B(b), an insurer shall disclose the fair value at the end of the reporting period and the amount of change in the fair value during that period for the following two groups of financial assets separately:

(a) financial assets with contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (ie financial assets that meet the condition in paragraphs 4.1.2(b) and 4.1.2A(b) of AASB 9), excluding any financial asset that meets the definition of held for trading in AASB 9, or that is managed and whose performance is evaluated on a fair value basis (see paragraph B4.1.6 of AASB 9).

(b) all financial assets other than those specified in paragraph 39E(a); that is, any financial asset:

(i) with contractual terms that do not give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding;

(ii) that meets the definition of held for trading in AASB 9; or

(iii) that is managed and whose performance is evaluated on a fair value basis.

When disclosing the information in paragraph 39E, the insurer:

(a) may deem the carrying amount of the financial asset measured applying AASB 139 to be a reasonable approximation of its fair value if the insurer is not required to disclose its fair value applying paragraph 29(a) of AASB 7 (eg short-term trade receivables); and

(b) shall consider the level of detail necessary to enable users of financial statements to understand the characteristics of the financial assets.

To comply with paragraph 39B(b), an insurer shall disclose information about the credit risk exposure, including significant credit risk concentrations, inherent in the financial assets described in paragraph 39E(a). At a minimum, an insurer shall disclose the following information for those financial assets at the end of the reporting period:

(a) by credit risk rating grades as defined in AASB 7, the carrying amounts applying AASB 139 (in the case of financial assets measured at amortised cost, before adjusting for any impairment allowances).

(b) for the financial assets described in paragraph 39E(a) that do not have low credit risk at the end of the reporting period, the fair value and the carrying amount applying AASB 139 (in the case of financial assets measured at amortised cost, before adjusting for any impairment allowances). For the purposes of this disclosure, paragraph B5.5.22 of AASB 9 provides the relevant requirements for assessing whether the credit risk on a financial instrument is considered low.

To comply with paragraph 39B(b), an insurer shall disclose information about where a user of financial statements can obtain any publicly available AASB 9 information that relates to an entity within the group that is not provided in the group’s consolidated financial statements for the relevant reporting period. For example, such AASB 9 information could be obtained from the publicly available individual or separate financial statements of an entity within the group that has applied AASB 9.

If an entity elected to apply the exemption in paragraph 20O from particular requirements in AASB 128, it shall disclose that fact.

If an entity applied the temporary exemption from AASB 9 when accounting for its investment in an associate or joint venture using the equity method (for example, see paragraph 20O(a)), the entity shall disclose the following, in addition to the information required by AASB 12 Disclosure of Interests in Other Entities:

(a) the information described by paragraphs 39B–39H for each associate or joint venture that is material to the entity. The amounts disclosed shall be those included in the Australian-Accounting-Standards financial statements of the associate or joint venture after reflecting any adjustments made by the entity when using the equity method (see paragraph B14(a) of AASB 12), rather than the entity’s share of those amounts.

(b) the quantitative information described by paragraphs 39B–39H in aggregate for all individually immaterial associates or joint ventures. The aggregate amounts:

(i) disclosed shall be the entity’s share of those amounts; and

(ii) for associates shall be disclosed separately from the aggregate amounts disclosed for joint ventures.

An insurer that applies the overlay approach shall disclose information to enable users of financial statements to understand:

(a) how the total amount reclassified between profit or loss and other comprehensive income in the reporting period is calculated; and

(b) the effect of that reclassification on the financial statements.

To comply with paragraph 39K, an insurer shall disclose:

(a) the fact that it is applying the overlay approach;

(b) the carrying amount at the end of the reporting period of financial assets to which the insurer applies the overlay approach by class of financial asset;

(c) the basis for designating financial assets for the overlay approach, including an explanation of any designated financial assets that are held outside the legal entity that issues contracts within the scope of this Standard;

(d) an explanation of the total amount reclassified between profit or loss and other comprehensive income in the reporting period in a way that enables users of financial statements to understand how that amount is derived, including:

(i) the amount reported in profit or loss for the designated financial assets applying AASB 9; and

(ii) the amount that would have been reported in profit or loss for the designated financial assets if the insurer had applied AASB 139.

(e) the effect of the reclassification described in paragraphs 35B and 35M on each affected line item in profit or loss; and

(f) if during the reporting period the insurer has changed the designation of financial assets:

(i) the amount reclassified between profit or loss and other comprehensive income in the reporting period relating to newly designated financial assets applying the overlay approach (see paragraph 35F(b));

(ii) the amount that would have been reclassified between profit or loss and other comprehensive income in the reporting period if the financial assets had not been de-designated (see paragraph 35I(a)); and

(iii) the amount reclassified in the reporting period to profit or loss from accumulated other comprehensive income for financial assets that have been de-designated (see paragraph 35J).

If an entity applied the overlay approach when accounting for its investment in an associate or joint venture using the equity method, the entity shall disclose the following, in addition to the information required by AASB 12:

(a) the information described by paragraphs 39K–39L for each associate or joint venture that is material to the entity. The amounts disclosed shall be those included in the Australian-Accounting-Standards financial statements of the associate or joint venture after reflecting any adjustments made by the entity when using the equity method (see paragraph B14(a) of AASB 12), rather than the entity’s share of those amounts.

(b) the quantitative information described by paragraphs 39K–39L(d) and 39L(f), and the effect of the reclassification described in paragraph 35B on profit or loss and other comprehensive income in aggregate for all individually immaterial associates or joint ventures. The aggregate amounts:

(i) disclosed shall be the entity’s share of those amounts; and

(ii) for associates shall be disclosed separately from the aggregate amounts disclosed for joint ventures.