Australian Securities and Investments Commission Class Order [CO 98/112] (Cth)

ASIC Class Order [CO 98/112]

Non-life companies which control life companies

This instrument has effect under subsection 341(1) of the Corporations Act 2001.

This compilation was prepared on 1 September 2005 taking into account amendments up to [CO 99/90].

Prepared by the Australian Securities and Investments Commission.

Australian Securities and Investments Commission
Corporations Law — Section 341(1) — Class Order and Revocation

Pursuant to subsection 341(1) of the Corporations Law (“the Law”) the Australian Securities and Investments Commission hereby makes an order in respect of each company in the class of companies mentioned in Schedule A (“the Company”) relieving the Company from compliance with the requirements of the Law specified in Schedule B where:

General provisions

(a)   the financial statements (“the Life Act financial statements”) of all controlled Australian life companies and all controlled foreign life companies (“controlled life companies”) which are used in preparing the Company’s consolidated financial statements cover the same financial year or half-year as the Company's consolidated financial statements and have been prepared in accordance with:

(i)    for controlled Australian life companies, the requirements of the Life Insurance Act 1995 including, but not limited to, the requirements of Commissioner's Rules No 21 and Actuarial Standard 1.01 “Valuation of Policy Liabilities” (together “the Rules”); and

(ii)   for controlled foreign life companies, the accounting methodologies required by the Rules for Australian life companies  and with separate figures being presented for the foreign life company’s statutory funds (including the notional statutory funds referred to in condition (n));

(b)   where a controlled life company has any controlled entities, the Life Act financial statements which are used in preparing the Company's consolidated financial statements are consolidated financial statements which comply with the consolidation requirements contained in the Rules;

(c)   the balance sheet and the profit and loss account of the shareholder fund of each controlled life company appearing in the Life Act financial statements are consolidated in the Company's consolidated financial statements in accordance with the requirements of AASB 1024 as modified by condition (e) of this Order;

(d)   the profit or loss of each controlled life company which is included in the current year profit or loss in the Company’s consolidated financial statements is equal to the total of such parts of the following amounts as relate to that part of the financial year or half-year during which the life company was controlled by the Company:

(i)    the profit or loss allocated to shareholders appearing in the shareholders’ fund column of the profit and loss account in the Life Act financial statements; and

(ii)   the profit or loss allocated to shareholders appearing in the statutory funds column of the profit and loss account in the Life Act financial statements,

       adjusted, and adjusted only, in accordance with the requirements of AASB 1024, as modified by condition (e) of this Order;

(e)   paragraph 17 of AASB 1024 is applied as if the Rules were an Accounting Standard;

(f)    no reclassifications or adjustments are made in the comparative figures in the Company's consolidated financial statements in respect of a controlled life company, other than such reclassifications within the notes supporting the operating profit or within the categories of current assets, non-current assets, current liabilities and non-current liabilities as are necessary to facilitate comparison with the figures presented for the current financial year or half-year;

First year of adoption

(g)   where any revenue or expense arises from a change in accounting policy in the Company's consolidated financial statements, which results from complying fully for the first time with the requirements of the Rules in relation to:

(i)    all controlled life companies because the Company has not previously adopted this class order or a corresponding previous order in relation to any controlled life company; or

(ii)   a controlled foreign life company where the Company has not previously adopted this class order,

       the revenue or expense is treated in the Company’s consolidated financial statements in accordance with paragraph 11 of AASB 1018 as if the revenue or expense results from complying with a statutory requirement which specifically requires the making of an initial accounting entry to give retroactive effect to the changed accounting policy;

(h)   the revenue or expense referred to in condition (g) is determined as the difference between:

(i)    the total of the retained profits/accumulated losses allocated to shareholders which appeared in the shareholders' fund column and the statutory funds column of the balance sheet in financial statements prepared by the controlled life company in accordance with the Rules at the end of the Company's previous financial year (or would have so appeared if the controlled life company had prepared such financial statements at that date), adjusted, and only adjusted, in accordance with the requirements of AASB 1024 as modified by condition (e) of this Order; and

(ii)   any amount of retained profits or accumulated losses and Asset Revaluation Reserve included in the Company’s consolidated balance sheet at the end of the Company’s previous financial year in respect of the controlled life company, adjusted for the effect of any amounts transferred to other reserves in prior years which are still included in the balance of those reserves and are not reflected in the amount determined in accordance with part (i) of this condition;

(i)    except where the Company has previously adopted this class order or a corresponding previous order in relation to a controlled life company, the balance of any Asset Revaluation Reserve included in the Company's consolidated balance sheet at the end of the Company's previous financial year in respect of that controlled life company is transferred directly to opening retained profits;

(j)    no adjustment is made in accordance with condition (g) in respect of a life company which became controlled by the Company during the current financial year or half-year;

Equity accounting

(k)   if AASB 1016 is applied in accounting for the statutory funds of the controlled life company, paragraph 5.9 of AASB 1016 is applied to accounting in relation to the statutory funds of the controlled life company as if the Rules were an Accounting Standard;

Disclosure requirements

(l)    the notes to the Company’s consolidated financial statements separately disclose:

(i)    the amount of unrealised profits and losses recorded directly in the consolidated profit and loss statement in relation to assets held by the shareholder funds of controlled Australian life companies, if material;

(ii)   the amount of unrealised profits and losses recorded directly in the consolidated profit and loss statement in relation to portfolio investments associated with non-insurance business of controlled foreign life companies where the accounting methodologies contained in the Rules have been applied in relation to those investments, if material;

(iii)   the amount of the excess of the net market values of the interests in the Company’s controlled entities which are held by controlled life companies through their shareholder funds over the net amount of the assets and liabilities of those controlled entities recognised on consolidation, if material;

(iv)  the nature of, and the reasons for, changes in accounting policy giving rise to the revenue or expense referred to in condition (g);

(v)   any amount included in the revenue or expense referred to in condition (g) which arises from changes in the timing of recording transfers between the funds of the controlled life insurance company; and

(vi)  where the company has previously adopted this class order or a corresponding previous order, comparative information to the amounts required to be disclosed by conditions (l)(i), (ii) and (iii) to the extent that the information was required to be separately disclosed in the corresponding prior financial year and/or half-year;

(m)  a statement containing a reference to this class order is included in the notes to the Company’s consolidated financial statements;

Controlled foreign life companies

(n) if a controlled foreign life company does not maintain separate statutory funds in respect of its life insurance business, conditions (a) to (m) are applied as if the company did maintain one or more statutory funds attributable to its life insurance business in accordance with the Life Insurance Act 1995;

 (o)  notwithstanding any relief or conditions otherwise contained in this order, where a controlled foreign life company conducts non-insurance business either:

(i)    directly and that business is not reasonably attributable to policyholder interests; or

(ii)   through a controlled entity where the investment in that controlled entity is not reasonably attributable to life insurance policyholder interests,

       and the assets, liabilities, revenues or expenses attributable to the non-insurance business are material, then:

(iii)   in relation to the assets, liabilities, revenues and expenses of any non-insurance business:

(A)       adjust for dissimilar accounting policies in accordance with the requirements of AASB 1024 and AASB 1016; and

(B)       apply the provisions of paragraphs 5.1 to 5.3 of AASB 1034,

(iv)  in relation to any portfolio investments associated with non-insurance business, apply the treatment in paragraph (iii), unless paragraph (v) applies; and

(v)   at option of the Company, apply the accounting requirements of the Rules in relation to all portfolio investments associated with non-insurance business, if:

(A)       more than 50% of the total consolidated assets and more than 50% of the total consolidated revenues of the foreign life company and its controlled entities (including assets and liabilities held in statutory funds or otherwise attributable to policyholder interests) are reasonably attributable to policyholder interests or the total consolidated assets and total consolidated revenues of the foreign life company are not material; and

(B)       the accounting requirements of the Rules have been  applied in respect of all portfolio investments associated with the non-insurance business in each previous financial year and half-year (if any) in respect of which the Company has applied this order in relation to the controlled foreign life company;

(p)   if a concise financial report is prepared, accounting standard AASB 1039 “Concise Financial Reports” is applied as if paragraph 5.2 were replaced by the following paragraph:

“5.2 Each financial statement must be presented as in the financial report, in accordance with current Accounting Standards (as modified by the application of any relief provided by the Australian Securities and Investments Commission pursuant to s340 or s341 of the Corporations Law), except for the omission of cross-references to notes to the financial statements in the financial report.”; and

(q)   any concise financial report for the Relevant Accounting Period includes the statement “Controlled life companies have been consolidated in accordance with relief provided by ASIC Class Order 98/0112.” or a similar statement.

SCHEDULE A

A company which controls a body corporate that is either:

(i) registered under the Life Insurance Act 1995 (“an Australian life company”); or

(ii)   incorporated or formed outside Australia and carries on life business (“a foreign life company”).

SCHEDULE B

1     Section 296 insofar as that section requires the directors of the Company to ensure that the Company’s consolidated financial statements for a financial year or half-year (“the Relevant Accounting Period”) ending on or after 1 July 1998  (7 July 1998 if the Company applies Class Order 98/0095 dated 10 July 1998) and before 31 December 1999 (except for a half-year where the full financial year is expected to end on or after 31 December 1999) are made out in accordance with:

(a)   paragraph 17 of accounting standard AASB 1024 “Consolidated Accounts” insofar as it applies to the consolidation of a controlled Australian life company or a controlled foreign life company (“a controlled life company”);

(b)   paragraph 10 of accounting standard AASB 1018 “Profit and Loss Accounts” insofar as it requires the current year profit or loss in the Company’s consolidated financial statements to take into account all items of revenue and expense resulting from a change in accounting policy on adoption for the first time of the full requirements of Commissioner’s Rules No 21 and Actuarial Standard 1.01 “Valuation of Policy Liabilities” in respect of:

(i)         a controlled life company where the Company has not previously adopted this class order or a corresponding previous order; or

(ii)        a controlled foreign life company where the Company has not previously adopted this class order,

       other than a life company which became controlled during the current financial year; and

(c)   paragraphs 12(a), (b), (d) and (e) of accounting standard AASB 1029 “Half-Year Accounts and Consolidated Accounts” and paragraphs 5.1 and 5.2 of accounting standard AASB 1034 “Information to be Disclosed in Financial Reports” insofar as those provisions require investment assets of the controlled life company to be grouped according to whether they are current or non-current and to be described as current or non-current in the Company's consolidated financial statements.

2     Paragraph 5.9 of accounting standard AASB 1016 “Accounting for Investments in Associates” (“AASB 1016”) insofar as it applies to accounting in respect of the statutory funds of a controlled life company.

Interpretation

In this order:

“Company’s consolidated financial statements” means the Company’s consolidated financial statements and the notes thereto;

“corresponding previous order” means any of the following Australian Securities Commission class orders — Class Order 97/0171 dated 17 February 1997, Class Order 97/1013 dated 9 July 1997 or Class Order 98/0092 dated 30 January 1998;

“general insurance business” means business attributable to activities which would be considered “general insurance activities” for the purposes of AASB 1023 “Financial Reporting of General Insurance Activities” and excludes investments which are not integral to the general insurance activities;

something is “material” if it would be material in accordance with the criteria contained in the second sentence of paragraph 4.1 of accounting standard AASB 1031 “Materiality” for the purposes of the Company's consolidated financial statements;

“life business” means business that would be life insurance business for the purposes of section 11 of the Life Insurance Act 1995, irrespective of section 18 of that Act;

“non-insurance business” means business other than life business and general insurance business;

“portfolio investments” do not include any investments which are strategic investments to the Company, any of its controlled entities or the economic entity comprising the Company and its controlled entities; and

“strategic investments” include, as a minimum, investments which are held for a purpose other than, or in addition to, the receipt of investment income and/or capital appreciation.

Pursuant to subsection 341(1) of the Corporations Law the Australian Securities and Investments Commission hereby revokes Australian Securities Commission (“ASC”) Class Order Number 98/0092 dated 30 January 1998 and ASC Class Order Number 98/1006 dated 17 June 1998 with effect from:

(i)    in respect of entities which apply the relief provided by Class Order 98/0095 dated 10 July 1998, financial years ending after 7 July 1998; and

(ii)   in all other cases, financial years ending after 30 June 1998.

Notes to ASIC Class Order [CO 98/112]

Note 1

ASIC Class Order [CO 98/112] (in force under subsection 341(1) of the Corporations Act 2001) as shown in this compilation comprises that Class Order amended as indicated in the Tables below.

Table of Instruments

Instrument number	Date of making or FRLI registration	Date of commencement	Application, saving or transitional provisions
[CO 98/112]	10/7/1998	10/7/1998	-
[CO 99/90]	11/2/1999	11/2/1999	-

Table of Amendments

ad. = added or inserted     am. = amended     rep. = repealed     rs. = repealed and substituted

Provision affected	How affected
Para (k)	am. [CO 99/90]
Para (n)	am. [CO 99/90]
Para (o)	am. [CO 99/90]
Paras (p) and (q)	ad. [CO 99/90]
Schedule B, para 2	rs. [CO 99/90]
Schedule B, para 3	rep. [CO 99/90]