Financial Sector (Collection of Data) determination No. 21 of 2005 (Cth)
Financial Sector (Collection of Data) determination No. 21 of 2005
Reporting Standard GRS 310.3 (2005)
Financial Sector (Collection of Data) Act 2001
I, Charles Watts Littrell, a delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (‘the Act’) MAKE the reporting standard set out in the Schedule, which applies to financial sector entities of the kind specified in paragraph 2 of the reporting standard.
Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those entities on the later of 1 July 2005 and the date of registration on the Federal Register of Legislative Instruments.
Dated 21 June 2005
[signed]
……………………............
Charles Littrell
Executive General Manager
Policy, Research and Statistics Division
APRA
Interpretation
In this Notice
APRA means the Australian Prudential Regulation Authority.
Schedule
Reporting Standard GRS 310.3 (2005)
Investment and Operating Income and Expense
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act). It requires general insurers (insurers), including foreign general insurers (foreign insurers) operating in Australia through branch operations, to report to APRA, generally on a quarterly and annual basis, investment and operating income and expense.
This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with:
·the versions of Form GRF 310.3 Investment and Operating Income and Expense (Form GRF 310.3) designated for a ‘Licensed Insurer’ and ‘Consolidated Insurance Group’ and the instructions to those versions of the form (which are attached and all form part of this reporting standard).
Purpose
Data collected in each version of Form GRF 310.3 is used by APRA for the purpose of prudential supervision of insurers.
Application and commencement
This reporting standard applies to all insurers and shall begin to apply to those entities on the later of 1 July 2005 and the date of registration on the Federal Register of Legislative Instruments.
Information required
An insurer must provide APRA with the information required by the version of Form GRF 310.3 designated for a ‘Licensed Insurer’ for each reporting period.
An insurer that is a highest parent entity in relation to a consolidated insurance group must also provide APRA with the information required by the version of Form GRF 310.3 designated for a ‘Consolidated Insurance Group’ for each reporting period.
Forms and method of submission
The information required by this reporting standard must be given to APRA either:
(a)in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application; or
(b)manually completed on paper, which must be faxed or mailed to APRA’s head office.
Note: the Direct to APRA application software and paper forms may be obtained from APRA.
Reporting periods and due dates
Subject to paragraph 7, an insurer must provide the information required by this reporting standard:
(a) in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the insurer; and
(b) in respect of each financial year (within the meaning of the Corporations Act 2001) of the insurer.
Note: The annual information required by paragraph 3 read with subparagraph 6(b), together with certain annual information required by other reporting standards, will form part of the insurer’s yearly statutory accounts within the meaning of section 3 of the Insurance Act 1973 (the Insurance Act). This means that the information must be audited in accordance with paragraph 49J(1)(a) of the Insurance Act. Under subsection 49J(3), the auditor must give the insurer a certificate relating to the yearly statutory accounts, and that certificate must specify the matters provided for in the prudential standards. (The annual information required from a highest parent entity under paragraph 4 read with subparagraph 6(b) is not required to be audited. APRA proposes to determine an exemption, under section 7 of the Insurance Act, in relation to the obligations under Part IV Division 4 of the Act in respect of the auditing of this information.)
APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular insurer to require it to provide the information:
(a) more frequently (if, having regard to the particular circumstances of the insurer, APRA considers it necessary or desirable to obtain information more frequently for the purposes of the prudential supervision of the insurer); or
(b) less frequently (if, having regard to the particular circumstances of the insurer and the extent to which it requires prudential supervision, APRA considers it unnecessary to require the insurer to provide the information as frequently as provided by subparagraph 6(a) or (b)).
The information required by paragraph 3 of this reporting standard from an insurer must be provided to APRA by the following times:
(a) in the case of the quarterly information required by subparagraph 6(a) – 20 business days after the end of the reporting period to which the information relates; and
(b) in the case of the annual information required by subparagraph 6(b) – 4 months after the end of the reporting period to which the information relates.
Note: Paragraph 49L(1)(a) of the Insurance Act provides that the auditor’s certificate required under subsection 49J(3) of that Act must be lodged with APRA in accordance with the prudential standards. The prudential standards provide that the certificate must be submitted to APRA together with the yearly statutory accounts. Accordingly, the auditor’s certificate relating to the information required under paragraph 3 read with subparagraph 6(b) must be provided to APRA by the time specified in subparagraph 8(b) of this reporting standard (unless an extension is granted under paragraph 10).
The information required by paragraph 4 of this reporting standard from an insurer that is a highest parent entity must be provided to APRA by the following times:
(a) in the case of the quarterly information required by subparagraph 6(a) – 30 business days after the end of the reporting period to which the information relates; and
(b) in the case of the annual information required by subparagraph 6(b) – 4 months after the end of the reporting period to which the information relates.
APRA may grant an insurer an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.
Quality control
The information provided by an insurer under this reporting standard (other than the information required from a highest parent entity under paragraph 4) must be the product of processes and controls that have been reviewed and tested by the approved auditor of the insurer. This will require the auditor to review and test the systems, processes and controls supporting the reporting of the information to ensure that they produce accurate data and are otherwise reliable. This review and testing must be done on an annual basis or more frequently if necessary to enable the approved auditor to form an opinion on the accuracy and reliability of the data.
The information provided by an insurer under this reporting standard must be subject to processes and controls developed by the insurer for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the insurer to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
Authorisation
If an insurer submits information under this reporting standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the insurer to digitally sign, authorise and encrypt the relevant data. For this purpose, APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the insurer who have authority from the insurer to transmit the data to APRA.
If information under this reporting standard is provided in paper form, it must be signed on the front page of the relevant completed form by either:
(a) the Principal Executive Officer of the insurer; or
(b) the Chief Financial Officer of the insurer (whatever his or her official title may be).
Minor alterations to forms and instructions
APRA may make minor variations to:
(a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or
(b) the instructions to a form, to clarify their application to the form
without changing any substantive requirement in the form or instructions.
If APRA makes such a variation it must notify insurers in writing.
Transitional
If a reporting period of an insurer ended on 30 June 2005, or ends after that date, the insurer must report under this reporting standard in respect of that reporting period.
Interpretation
In this reporting standard:
Accounting Standard AASB 1024 means the accounting standard so designated made by the Australian Accounting Standards Board, being the accounting standard that applied in respect of reporting periods (within the meaning of that accounting standard) commencing immediately before 1 January 2005;
approved auditor means an auditor who has been approved by APRA under section 40 of the Insurance Act;
business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays;
consolidated insurance group means a group comprising:
(a) an insurer that is a highest parent entity; and
(b) each subsidiary under the control (within the meaning of Accounting Standard AASB 1024) of that insurer, whether the subsidiary is incorporated in Australia or not;
foreign insurer means a foreign general insurer within the meaning of the Insurance Act;
Note: A reference to a ‘branch’ or ‘branch operation’ is a reference to the Australian operations of a foreign insurer.
highest parent entity means an insurer that satisfies all of the following conditions:
(a) it is incorporated in Australia;
(b) it has at least one subsidiary under its control (within the meaning of Accounting Standard AASB 1024); and
(c) it is not itself a subsidiary of an insurer that is incorporated in Australia;
Insurance Act means the Insurance Act 1973;
insurer means a general insurer within the meaning of the Insurance Act;
Note: In the forms and instructions, a reference to an ‘authorised insurer’, ‘authorised insurance entity’ or ‘licensed insurer’ is a reference to an insurer, and a reference to an ‘authorised reinsurance entity’ is a reference to an insurer whose business consists only of undertaking liability by way of reinsurance.
Principal Executive Officer means the principal executive officer of the insurer for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the insurer;
reporting period means a period mentioned in subparagraph 6(a) or (b) or, if applicable, paragraph 7.
Reporting Form GRF 310.3
Investment and Operating Income and Expense
Instruction Guide
Introduction
This form collects specific financial information in the operating performance of the reporting insurance entity.
Audit requirements
The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing. The forms relating to the consolidated insurance group reporting unit is not subject to audit review and testing.
The scope and nature of audit testing required is outlined in the applicable Audit Guidance Statement issued by the Auditing and Assurance Board of the Australian Accounting Research Foundation.
Information provided in the form in respect of a financial year of an insurer forms part of the insurer’s ‘yearly statutory accounts’ within the meaning of section 3 of the Insurance Act 1973. This means that:
the completed form for the financial year must be audited by the approved auditor of the insurer (see paragraph 49J(1)(a) of the Act);
the insurer must make such arrangements as to enable the auditor to do this (subsection 49J(2));
the auditor must give the insurer a certificate relating to the completed form (and other completed forms that are part of the insurer’s yearly statutory accounts), which must contain statements of the auditor’s opinion on the matters required by the prudential standards to be dealt with in the certificate (subsection 49J(3));
the certificate must be lodged with APRA as provided for in the prudential standards (paragraph 49L(1)(a)), namely by the due date for lodging the form in respect of the financial year for the insurer.
Reporting entities
Forms are to be completed for the following reporting entities where appropriate:
Branch insurers of a foreign parent insurer (reference to licensed insurer in the form means total operations of the branch, excluding the parent operations);
Authorised insurance entities, including mutual entities (reference to licensed insurer in the form means total operations of the licensed entity);
Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity); and
Consolidated insurance groups.
Note: the form for the consolidated insurance group is only required to complete the information requirements on the form. No risk change is applied to the consolidated insurance group at this stage.
For the purposes of APRA prudential reporting, the consolidated insurance group is interpreted as the accounts incorporating the highest parent entity in a group structure, that is an Australian authorised general insurance entity (for the purposes of the Act), and includes all subsidiaries, associates and joint ventures (registered both in Australia and overseas) of that parent entity.
For the purposes of this form, the highest parent entity in the corporate group does not include a company (e.g. non-operating holding company) that is not an authorised general insurance entity.
Definition of subsidiaries should be consistent with the requirements of Australian accounting standards AASB 1024 ‘Consolidated Accounts’ and definition of associates should be consistent with AASB 1016 ‘Accounting for Investments in Associates’.
Exemptions from the Consolidated Insurance Group requirements
Australian authorised insurers which do not have any subsidiaries are not required to complete the forms for this reporting unit.
Australian authorised insurers which have subsidiaries, but the financial position of the consolidated insurance group is not materially different from that of the licensed insurance entity, are not required to complete the forms for this reporting unit (i.e. the subsidiaries do not have any material dealings/balances).
Definitions
Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’. In addition, the ‘Glossary of Terms’ also contains a list of definitions of common data reporting items.
Unit of measurement
Amounts denominated in a currency other than Australian currency are to be converted to AUD in accordance with AASB 1012 ‘Foreign Currency Translation’.
The general requirements of AASB 1012 for translation are:
Foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date; and
Other items outstanding at the reporting date must not be retranslated subsequent to initial recognition of the transaction.
Monetary items are defined to mean money held and assets and liabilities that are to be received or paid in fixed or determinable amounts of money (e.g. claims payments, reinsurance recoveries).
Monetary items arising under foreign currency derivative contracts at the reporting date must be translated as follows:
Where the exchange rate is fixed in the contract, at that fixed exchange rate; and
Where the exchange rate varies, at the spot rate at the reporting date.
The general requirements of AASB 1012 for accounting treatment of exchange differences arising on translation are:
Exchange differences must be recognised as either revenues or expenses in the calculation of net profit or loss on GRF 310.3 Investment and Other Operating Income and Expense, in the reporting period in which the exchange rates change; and
Exchange differences arise in respect of foreign currency monetary items which is directly attributable to the acquisition, construction or production of an asset that takes a long period of time to get ready for its intended use or sale, must be capitalised (net of any effects of a hedge) as part of the cost of that asset.
Translation of financial reports of foreign operations.
(A foreign operation is defined in AASB 1012 as meaning an entity for which financial reports are prepared in a foreign currency, and includes branches, associates and subsidiaries).
Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a self-sustaining foreign operation, must be recognised as revenues or expenses in the calculation of net profit or loss on GRF 310.3 Investment and Other Operating Income and Expense, in the reporting period in which the exchange rates change.
However on incorporation of that foreign operation into the entity’s financial report (i.e. the preparation of consolidated group accounts), the translation of the financial reports of a self sustaining foreign operation as at the reporting date must be done using the current rate method (see below). Any exchange differences, together with any income tax expense (income tax revenue) must be taken directly to the foreign currency translation reserve within equity.
A self-sustaining foreign operation is defined in AASB 1012 as meaning a foreign operation that is financially and operational independent of the entity and whose operations do not normally expose the entity to foreign exchange gains and or losses.
Translation of financial reports of an integrated foreign operation must be translated as at the reporting date using the temporal method (see below) and any exchange differences must be recognised as revenues or expenses in the calculation of net profit and loss.
An integrated foreign operation is defined in AASB 1012 as a foreign operation that is financially and operationally interdependent, either directly or indirectly with the entity, and whose day to day operations normally expose the entity to foreign exchange gains or losses.
Current rate method of translation
Assets and liabilities are translated at the spot rate at the reporting date;
Equity at the date of investment, including in the case of a corporation, share capital at acquisition and pre-acquisition reserves, is translated at the exchange rate current at that date;
post-acquisition movements in equity, other than retained profits (surplus) or accumulated losses (deficiency), are translated at the exchange rates current at the dates of those movements, except that where a movement represents a transfer between items within equity or a return of equity, the movement is translated at the exchange rate current at the date that the amount transferred or returned was first included in equity;
distributions from retained profits (that is, dividends paid or proposed, or their equivalent) are translated at the exchange rates current at the dates when the distributions were first recognised; and
revenue and expense items are translated at the exchange rates current at the applicable transaction dates except that revenues and expenses that have been restated in accordance with paragraph 7.11 of AASB 1012 are translated at the spot rate at the reporting date[1]
[1]Extracted from ICAA Members' Handbook December 2001 issue, AASB 1012.
Temporal Method of Translation:
Means a method of translating the financial report of a foreign operation whereby:
(a) monetary items are translated at the spot rate at the reporting date; and
(b) non-monetary items are translated at exchange rates current at the transaction dates or, where a non-monetary item has been revalued or written-down or the write-down has been reversed, at the exchange rate current at the date of revaluation, write-down or reversal;
equity at the date of investment, including in the case of a corporation, share capital at acquisition and pre-acquisition reserves, is translated at the exchange rate current at that date;
post-acquisition movements in equity, other than retained profits (surplus) or accumulated losses (deficiency), are translated at the exchange rates current at the dates of those movements, except that where a movement represents a transfer between items within equity or a return of equity, the movement is translated at the exchange rate current at the date that the amount transferred or returned was first included in equity;
distributions from retained profits (that is, dividends paid or proposed, or their equivalent) are translated at the exchange rates current at the dates when the distributions were first recognised; and
revenue and expense items are translated at the exchange rates current at the applicable transaction dates, except that:
(a) revenues and expenses (including depreciation) that relate to non-monetary items are translated at the rates used to translate those non-monetary items; and
(b) revenues and expenses that have been restated in accordance with paragraph 7.11 are translated at the spot rate at the reporting date.[2]
Spot rate means the exchange rate for immediate delivery of currencies to be exchanged.
Reporting period
Insurers are required to report the information in the reporting form on a quarterly and annual basis.
[2] Extracted from ICAA Members' Handbook December 2001 issue, AASB 1012.
The quarterly information is to be completed in respect of each quarter based on the financial year of the insurer, not the calendar year.
The annual information is to be completed in respect of the financial year of the insurer.
The financial information requested in this form is to be reported as at the last day of the reporting period on a financial year to date basis of the insurer. See the Reporting Requirements table for details.
Reporting lag
This form must be lodged for each of the reporting units within the number of business days after the end of the quarter as set out in the Reporting Requirements table.
Basis of preparation
Unless specifically mentioned in these instructions insurers are to following the recognition and measurement requirements of the Australian accounting standards in completing this form.
The interpretation and required measurement basis for items listed in the form are specified in these instructions and also outlined in the introduction to the reporting package.
Market value measurement of assets
AASB 1023 requires net market value to be used in measuring assets that are deemed to be ‘integral to the general insurance activities’. However for the purposes of regulatory reporting market value can be used (i.e. ignore transactions costs).
Market value or fair value has the same meaning as defined in the Australian Accounting standards. Market value is defined for accounting purposes as a subset of fair value, where fair value means the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's-length transaction, and is determined as follows:
The quoted market price in an active and liquid market (i.e. market value); or
When there is infrequent activity in a market, the market is not well established, small volumes are traded relative to the asset or liability to be valued, or a quoted market price is not available – an estimate of a price for the asset or liability in an active and liquid market.
AASB 1023 provides that assets that are deemed not to be ‘integral to the general insurance activities’ of the insurer are able to be valued using historical cost rather than net market value. This basis can be applied for the purposes of this form.
Market value of charged/encumbered assets
If an asset is in any way subject to a charge, covenant, encumbrance, option to purchase or any other arrangement by way of agreement or statute, that restricts the market value of the asset, the market value needs to reflect the existence of these arrangements. For example, if the insurer has agreed to deliver an asset to a purchaser at a price below the arms length market value, the market value cannot exceed the agreed price. This may also have relevance to this form.
Netting
Unless otherwise specifically stated, institutions are allowed to take advantage of netting agreements in relation to disclosure of data items in this form. Institutions are to comply with the prerequisite for netting outlined in Australian accounting standards notably AASB 1014 ‘Set-off and Extinguishment of Debt’.
Related party disclosure
Amounts due from, loans to, debentures of, shares in, or units in a trust or body corporate that is related to the insurer are to be disclosed for items of assets and liabilities where indicated in the form. For the purposes of this form, related bodies corporate are to be interpreted consistently with the meaning as in AASB 1017. AASB 1017 provides that related party means, in relation to a reporting entity any:
(a) other entity that at any time during the financial year, has control or significant influence over the reporting entity; or
(b) other entity that at any time during the financial year, is subject to control or significant influence by the reporting entity; or
(c) other entity that, at any time during the financial year, is controlled by the same entity that controls the reporting entity. Referred to as a situation in which entities are subject to common control; or
(d) other entity that, at any time during the financial year, is controlled by the same entity that significantly influences the reporting entity; or
(e) other entity that, at any time during the financial year, is significantly influenced by the same entity that controls the reporting entity; or
(f) director of the reporting entity or any of their director-related entities; or
(g) director of any other entity identified as a related party under any of paragraphs (a) to (e), or any of their director-related entities;
but excludes any other entity (except those identified as a related party under paragraph (f)) where the related party relationship results solely from normal dealings of:
(h) financial institutions; or
authorised trustee corporations; or
(j) fund managers; or
(k) trade unions; or
(l) statutory authorities; or
(m) government departments; or
(n) local governments.[3]
[3]Extracted from ICAA Members' Handbook December 2001 issue, AASB 1017.
AASB 1017 defines director-related entities as meaning ‘the spouses of such directors, relatives of such directors or spouses and any other entity under the joint or several control or significant influence of such directors, spouses or relatives’.
Relative in relation to a person is defined in the Corporations Law to mean the spouse, partner, son, daughter, or brother or sister of the person.
Specific Instructions
Investment Income
Interest
Interest is the income normally receivable on assets such as deposits, loans, bonds, and accounts receivable. Interest must be recognised and measured in accordance with the Australian accounting standards. This will mean that interest income is recognised on an accrual basis, unless the asset is considered to be impaired/non-performing in which interest is to be recognised on a cash basis. Include:
Coupon payments from fixed interest securities (i.e. Commonwealth Govt Bonds);
Earnings on discounted securities (i.e. bank accepted bills);
Interest from deposits with banks and non-bank financial intermediaries;
Interest from loans and advances (to related and unrelated entities); and
Interest on finance leases.
For the purposes of this form, interest income is to be disclosed into the following categories:
Parent/controlled entities
Report the interest received/receivable from:
the parent (direct or ultimate parent of the group) of the licensed insurer; and
entities controlled by the reporting insurer; or
entities controlled by the foreign parent insurer for branches.
Other related parties
Report the interest received/receivable from all other related entities (other than disclosed above). Related entity has the meaning as in AASB 1017. Refer to the definition of related parties provided in 6 of the instruction guide.
Derivatives
Report the interest received/receivable in relation to derivative positions e.g. from swap contracts. If interest income from derivative contracts is with the parent/controlled entities or other related entities, report interest income under the appropriate headings above, do not duplicate reporting under this heading.
Other
Report the interest received/receivable from other sources not reported above.
Dividends
Dividend is the income receivable on assets such as shares, units and trusts. For the purposes of this form, dividend income is to be disclosed into the following categories:
Parent/controlled entities
Report dividends received/receivable from:
the parent (direct or ultimate parent of the group) of the licensed insurer; and
entities controlled by the reporting insurer; or
entities controlled by the foreign parent insurer for branches.
Other related parties
Report dividends received/receivable from all other related entities (other than disclosed above). Related entity has the meaning as in AASB 1017. Refer to definition provided in general section of the instruction guide page 6.
Other
Report dividends received/receivable from other sources not reported above.
Rental income
Rent is the income receivable on assets such as land and property. For the purposes of this form, rental income is to be disclosed into the following categories:
Parent/controlled entities
Report rental income received/receivable from:
the parent (direct or ultimate parent of the group) of the licensed insurer; and
entities controlled by the reporting insurer; or
entities controlled by the foreign parent insurer for branches.
Other related parties
Report rental income received/receivable from all other related entities (other than disclosed above). Refer to definition of related parties provided on page 6.
Other
Report rental income received/receivable from other sources not reported above.
Trust distributions
This refers to the distributions received or receivable in relation to investments in trust vehicles. Disclose trust distributions into the following categories:
Parent/controlled entities.
Report trust distributions received/receivable from:
the parent (direct or ultimate parent of the group) of the licensed insurer; and
entities controlled by the reporting insurer; or
entities controlled by the foreign parent insurer for branches.
Other related parties
Report trust distributions received/receivable from all other related entities (other than disclosed above). Refer to definition of related parties provided on page 6.
Other
Report trust distributions received/receivable from other sources not reported above.
Other distributions
Specify the nature of other forms of distributions not specifically reported in the form under the above categories.
Total ‘Other distributions’ which are from:
Report the amount of total Other distributions that are from the following:
Parent/controlled entities
Report the total of other distributions received/receivable that are from:
the parent (direct or ultimate parent of the group) of the licensed insurer; and
entities controlled by the reporting insurer; or
entities controlled by the foreign parent insurer for branches.
Other related parties
Report the total of other distributions received/receivable that are from all other related entities (other than disclosed above). Refer to definition of related parties provided on page 6.
Foreign exchange gains/losses (realised and unrealised) on Investments
Investments (other than from derivatives)
Report realised and unrealised currency exchange gains/losses relating to the translation/conversion into Australian currency of investments (e.g. every investment other than derivative positions) denominated in a currency other than the Australian currency. Do not report the gains and losses attributable to the movement in the market value of the underlying investments that are denominated in a foreign currency, these are reported below under “Change in net market value of investments”. Only report the gain/loss that is attributable to movements in the currency value the investments are denominated in, respective to the Australian currency.
Derivatives
Report exchange gains/losses relating to the currency translation/conversion in the Australian currency of derivative contracts held in relation to the underlying investment portfolios (e.g. as hedges of the interest rate or equity investment portfolios or as outright position taking - altering the asset allocation strategy). Do not report the gains and losses attributable to the movement in the market value of the derivative position that are denominated in a foreign currency, these are reported below under “Change in net market value of investments”. Only report the gain/loss that is attributable to movements in the currency value that the derivative contract is denominated in, respective to the Australian dollar.
Change in net market value of investments
(a) Unrealised gains/losses
Change in net market value is the increase or decrease in the market value of each asset compared to the value of that asset at the beginning of the reporting period. These assets are still owned by the insurer at the end of the period, they have not been sold as a result the gains or losses on the assets are termed unrealised. If the assets are sold during the reporting period, then the gains or losses are realised and are to be disclosed separately under part (b) “Realised gains/losses”.
Only include the movement in the market value of the asset. Do not include the movement in the value of the currency comparative to the Australian dollar if the asset is denominated in a currency other than the Australian dollar. Movements in value attributable to the movements in the currency exchange rates are to be separately disclosed under the heading “Foreign exchange gains/losses (realised and unrealised)”.
For the purposes of this return unrealised gains/losses must be disclosed into the following categories:
Direct Investments:
This relates to investments where the reporting insurer holds direct title/ownership of the underlying asset (i.e. holding of debt securities, listed equity securities, freehold property).
Interest rate investments
Do not include unrealised gains/losses on interest rate related derivative contracts. These are to be disclosed separately under the heading “Derivatives”.
Equity investments
Do not include unrealised gains/losses on equity related derivative contracts. These are to be disclosed separately under the heading Unrealised gains/losses - “Derivatives”.
Property investments
Loans and advances
Disclose any unrealised gain/loss on the loans and advances portfolio. This is only applicable where the reporting insurer revalues the loans and advances portfolio to market value.
Derivatives
Disclose unrealised gains/losses in the market value of the derivative exposure. Do not include unrealised or realised movements in foreign currency derivative contracts, as these are to be separately disclosed under the heading “Foreign exchange gains/losses (realised and unrealised)”.
Indirect Investments:
This relates to investments where the reporting insurer does not hold direct title/ownership of underlying assets (i.e. holding of units in listed or unlisted unit trusts).
Units in trusts/managed investment vehicles
Disclose the change in net market value (unrealised gain/loss) of holdings of units in trusts or other management investment vehicles.
(b) Realised gains/losses
Change in net market value is the increase or decrease in the market value of each asset at the date of its disposal, compared to the value of that asset at the beginning of the reporting period or when last revaluation recognised. These assets have been sold and as a result the gains or losses on the assets are termed realised. If the assets has not been sold during the reporting period, then the gains or losses are unrealised and are to be disclosed separately under part (a) “Unrealised gains/losses”.
Only include the movement in the market value of the asset. Do not include the movement in the value of the currency comparative to the Australian dollar if the asset is denominated in a currency other than the Australian dollar. Movements in value attributable to the movements in the currency exchange rates are to be separately disclosed under the heading “Foreign exchange gains/losses (realised and unrealised)”.
For the purposes of this return realised gains/losses must be disclosed into the following categories:
Direct Investments:
This relates to investments where the reporting insurer holds direct title/ownership of the underlying asset (i.e. holding of debt securities, listed equity securities, freehold property).
Interest rate investments
Do not include realised gains/losses on interest rate related derivative contracts. These are to be disclosed separately under the heading “Derivatives”.
Equity investments
Do not include realised gains/losses on equity related derivative contracts. These are to be disclosed separately under the heading realised gains/losses - “Derivatives”.
Property investments
Loans and advances
Disclose any realised gain/loss on the loans and advances portfolio. This is only applicable where the reporting insurer revalues the loans and advances portfolio to market value.
Derivatives
Disclose realised gains/losses. Do not include realised gains and losses on movements in foreign currency derivative contracts, as these are to be separately disclosed under the heading “Foreign exchange gains/losses (realised and unrealised)”.
Indirect Investments:
This relates to investments where the reporting insurer does not hold direct title/ownership of underlying assets (i.e. holding of units in listed or unlisted unit trusts).
Units in trusts/managed investment vehicles
Disclose the realised gain or loss arising on disposal of holdings of units in trusts or other management investment vehicles.
Other investment income
Report investment income from sources not specifically reported elsewhere in the form.
Provide a brief description in the space provided in the form, of the nature of the income.
Total investment income
Sum the value of the totals disclosed for ‘Interest Income’, ‘Dividend Income’, ‘Rental Income’, ‘Foreign exchange gains/losses (realised & Unrealised)’, ‘Change in net market value of investments – Unrealised gains/losses’ and ‘Change in net market value of investments – Realised gains/losses’.
Total investment income, which are attributable to shareholders funds.
Disclose that value of total investment income that is associated or attributable to the investment of shareholders funds only.
Other operating income
Include income earned which does not constitute investment income and is reported under the section titled “Investment Income” i.e. income or expense that does not relate to the investment portfolio of the general insurer. Some of these items will not be applicable for branch operations.
Realised gains/losses on disposal of:
Insurance portfolios
Disclose any realised gain or loss recorded on the sale or transfer of insurance portfolios.
Investments in controlled entities (this is not applicable for branch operations)
Disclose any realised gain or loss recorded on the disposal (partial and full disposal) of the investment in controlled entities. This should be done in compliance with AASB 1024 ‘Consolidated Accounts’.
Investments in Associates/Joint Ventures
Disclose any realised gain or loss recorded on the disposal (partial and full disposal) of the investment in associated entities or joint venture entities/operations. Joint ventures are to be interpreted as defined in AASB 1006 ‘Interests in Joint Ventures’ and Associates is to be interpreted as defined in AASB 1016 ‘Accounting for Investments in Associates’.
Other assets
Disclose any realised gain or loss recorded on the disposal of other assets not specifically disclosed above or under “Investment income” section.
Foreign exchange gains/losses (realised and unrealised)
Borrowings
Report realised and unrealised currency exchange gains/losses relating to the translation/conversion into Australian currency of the value of borrowings that are denominated in a currency other than the Australian Dollar.
Record the exchange gains losses relating to borrowings that are denominated in a currency other than Australian currency into the following:
Underlying exposure
This is the exchange gains/losses relating to the conversion of the underlying/physical borrowing.
Derivative exposure
This is the exchange gains/losses relating to the conversion of any derivative exposure taken by the insurer to hedge the currency risk associated with the underlying/physical borrowing.
Insurance liability
Report any realised and unrealised currency exchange gains/losses relating to the translation/conversion into Australian currency of the value of outstanding claims liabilities that are to be paid/settled in a currency other than the Australian Dollar.
Record the exchange gains losses relating to claims liability into the following:
Underlying exposure
This is the exchange gains/losses relating to the conversion of the underlying claim liability.
Derivative exposure
This is the exchange gains/losses relating to the conversion of any derivative exposure taken by the insurer to hedge the currency risk associated with the settlement of the underlying claim liability.
Other
Report any realised and unrealised currency exchange gains/losses relating to the translation/conversion into Australian currency of other liabilities not specifically required above. Include the currency exchange gains/losses on any derivative contracts taken to hedge movements in borrowings and outstanding claims liabilities that are denominated in a currency other than the Australian Dollar.
Net increment/decrement (or write down) from the revaluation of
Investments in controlled entities (not applicable for branch operations)
Disclose the value of any increment or write down in recoverable value of investment in controlled entities that is taken directly to the Statement of Financial Performance in accordance with AASB 1041 ‘Revaluation of Non-Current Assets’. Do not include revaluation increment or decrement that are taken to an Asset Revaluation Reserve.
Investments in Associates/joint ventures
Disclose the value of any increment or write down in recoverable value of investment in associates or joint ventures that is taken directly to the Statement of Financial Performance. Do not record revaluation increment or decrement that are taken to an Asset Revaluation Reserve in accordance with AASB 1041 ‘Revaluation of Non-Current Assets’.
Note:
This is not applicable where the reporting insurer accounts for these interests by the use of the equity method of accounting.[4]
[4] Accounting Standard AASB 1016 “Accounting for Investments in Associates” and Accounting Standard AASB 1006 “Interests in Joint Ventures” require that in applying the equity method of accounting to each investment in an associate or each interest in a joint venture entity, the investor or venturer:
Goodwill
Disclose the value of any write down in recoverable value of goodwill that is taken directly to the Statement of Financial Performance in accordance with AASB 1013 ‘Accounting for Goodwill’.
Other assets
Disclose the value of any increment or write down in recoverable value of other assets (except investments) not separately disclosed above, that are taken to the Statement of Financial Performance. Note do not record any values attributable to assets recorded as investments, these must be disclosed in the appropriate section under the heading “Investment Income”. Do not record revaluation increment or decrement that are taken to an Asset Revaluation Reserve.
Share of net profits (losses) of associates and joint ventures accounted for using the equity method
This represents income/loss recognised by the reporting insurer (or consolidated insurance group) where the equity method is adopted to account for the investment in the associate or joint venture as required by AASB 1016 ‘Accounting for Investments in Associates’ and AASB 1006 ‘Accounting for Interests in Joint Ventures’ (refer footnote 1 below).
Fees and commissions
Disclose the value of all fees and commissions income earned into the appropriate categories required in the form. Do not include commission revenue that is associated with underwriting activities and is disclosed as commission revenue in the calculation of underwriting expenses in GRF 310.0 Statement of Financial Performance.
Life Insurance
Disclose the value of income recognised from life insurance activities/business. Income earned is to be recognised in accordance with AASB 1038 ‘Life Insurance Business’.
Change in excess of market value of life insurance subsidiary over the recorded net assets of Life insurance subsidiary:
This represents any revaluation gain in the market value of the life insurance subsidiary recognised in accordance with AASB 1038 ‘Life Insurance Business’. This will only be applicable for the consolidated insurance group.
Income from Life Insurance Business
Report other income/loss from life insurance business (other than that reported as “Change in excess of market value of life insurance subsidiary over the recorded net assets of Life insurance subsidiary”). This may represents income recognised from life insurance business on a margin on service basis.
Other operating income
Disclose the value of any other operating income not separately disclosed above. Provide a brief description of the nature of this income in the space provided in the form.
Total other operating income
Represents the sum of the totals for the following “Other operating income” categories:
Realised gains/losses on disposal;
Foreign exchange gains/losses (realised and unrealised);
Net increment/decrement (or write down) from the revaluation;
Share of net profits (losses) of associates and joint ventures accounted for using the equity method;
Fees and Commissions;
Life insurance; and
Other operating income.
Operating expenses
Include expenses incurred (i.e. paid or payable) and recognised which are not ordinarily directly associated with the generation of Investment Income (i.e. expense that are not directly related to the investment portfolio of the general insurer).
Interest expense
Borrowings
Report the interest expense recognised with funds classified as borrowings in the Statement of Financial Position.
Loan capital
Report the interest expense recognised with funds classified as Loan capital in the Statement of Financial Position.
Other interest bearing liabilities
Report the interest expense associated with other interest bearing liabilities not separately disclosed above.
Derivatives
Report the interest expense associated with derivative contracts (i.e. swap contracts).
Total interest expense paid to:
Parent entity
Report the total interest expense that is paid/payable to the parent entity of the insurer or the consolidated group to the ultimate parent entity (i.e. foreign parent entity of a consolidated group in Australia).
Controlled entities (not applicable for branch operations)
Report the total interest expense that is paid/payable to controlled entities of the insurer. This is not applicable for the consolidated group.
Associates/Joint ventures
Report the total interest expense that is paid/payable to associated or joint venture operations/entities of the insurer.
Other related parties
Report the total interest expense that is paid/payable to other related parties not separately disclosed above. Related entity has the meaning as set out in page 2 of this instruction guide.
Personnel expenses
Wages & salaries
Report the total expenses relating to the payment of employees that represent wages and salaries. Wages and salaries expense in relation to employee expenses are to be recognised in accordance with AASB 1028 ‘Accounting for Employee Entitlements’.[5]
[5] Extracted from ICAA Members' Handbook December 2001 issue, AASB1028.
Other employee related costs
Report all other costs associated with the employment of employees other than direct salary and wages expense as disclosed above.
Occupancy and equipment expense
Depreciation/amortisation of:
Plant and equipment
Record the amount of depreciation recognised for plant and equipment. Depreciation expense is to be calculated in accordance with the requirements of AASB 1021 ‘Depreciation’.
Other
Record the amount of depreciation recognised for other depreciable assets not included above (e.g. motor vehicles). Depreciation expense is to be calculated in accordance with the requirements of AASB 1021 “Depreciation”.
Operating lease rentals
Record the amount of operating lease rentals paid/payable on leased assets (e.g. motor vehicles).
Other
Record amounts of all other types of occupancy and equipment expense not separately disclosed above.
Other operating expenses
Report the operating expenses of the business in accordance with AASB 1023 and other applicable accounting standards. The total will reconcile to the totals disclosed in the form titled “Investment & Operating Income and Expense”.
Amortisation of:
Other intangible assets
Report the amortisation charge against intangible assets other than goodwill.
Other assets
Report the amortisation charge against other assets not specifically noted above or under Occupancy and Equipment expense.
Note: Do not include the amortisation of Goodwill in this form, this is reported in GRF 310.0 Statement of Financial Performance. Goodwill must be recorded and amortised in accordance with AASB 1013 ‘Accounting for Goodwill’. Goodwill is to be amortised over its estimated useful life but not exceeding 20 years. The total will reconcile to the value disclosed as “Goodwill Amortisation” in GRF 300.0 Statement of Financial Performance.
Investment management fees
Record the amount of fees paid/payable that relate to the management/investment of the insurers investment portfolio. Include fees paid to independent third parties as well as related entities of the insurer/insurance group.
Other management fees
Record the amount of management fees paid/payable other than that disclosed as fees paid for the management/investment of the insurers investment portfolio. Include fees paid to independent third parties as well as related entities of the insurer/insurance group.
Other fees and commissions
Record the amount of all other fees and commissions paid/payable by the insurer/insurance group other than that already specifically disclosed above. Include fees paid to independent third parties as well as related entities of the insurer/insurance group.
Fees for:
Audit related services
Record the fees paid/payable that relate to the provision of audit related services to the insurer/insurance group by the appointed external audit firm.
Non-audit related services provided by audit firm
Record the fees paid/payable, that relate to the provision of non-audit related services by the appointed external audit firm.
Consulting fees
Record the amount of all other fees paid/payable by the insurer/insurance group other than that already specifically disclosed elsewhere in the form that relate to other professional services. Include fees paid to independent third parties as well as related entities of the insurer/insurance group.
Actuarial fees
Record the fees paid/payable that relate to the payment of actuarial services.
Directors fees
Record the fees paid/payable that relate to the payment of directors fees for the discharge of their service.
Bad & doubtful debts
This includes the amount representing increments to a provision for doubtful debts/impairment as well as bad debts written off directly against the profit and loss (i.e. where no provision has been created). This can be recorded in relation to receivables and loans and advances.
Other
Record all other operating expenses not specifically disclosed above.
Total other operating expenses
Represents the sum of the following categories:
Amortisation of Goodwill;
Amortisation Other intangible assets;
Amortisation Other assets;
Investment management fees;
Other management fees;
Audit fees;
Consulting fees;
Actuarial fees;
Directors fees;
Bad & doubtful debts; and
Other.
Total Operating Expenses
Represents the sum of the following categories:
Total interest expense;
Total personnel expenses;
Total occupancy and equipment expenses; and
Total other operating expenses.
Note on references to accounting standards
This Note is about references in these instructions to an accounting standard or accounting standards, e.g. where the instructions say that something must be done in accordance with a particular AASB or international accounting standard, or must be done in accordance with the accounting standards (however described) generally.
Where you see such a reference, you must read it as meaning the version of the accounting standard, or versions of the accounting standards, applying to reporting periods (within the meaning of the accounting standards) beginning immediately before 1 January 2005. Accordingly, the new AASB standards for 2005 are not to be applied.
Similarly, a reference to principles or conventions (however described) governing an accounting procedure or treatment shall be taken to refer to principles or conventions applicable in relation to reporting periods (within the meaning of the accounting standards) that began immediately before 1 January 2005.
(a) does not measure its investment or interest on the fair value basis; but
(b) recognises its share of certain post-acquisition movements credited or debited to the asset revaluation reserve of the associate or joint venture entity[4]
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