Financial Sector (Collection of Data) (reporting standard) determination No. 1 of 2007 MRS 120.0 Capital Base (Cth)
Financial Sector (Collection of Data) (reporting standard) determination No. 1 of 2007
Reporting standard MRS 120.0 Capital Base
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) and subsection 33(3) of the Acts Interpretation Act 1901:
REVOKE the Reporting Standard MRS 120.0: Capital Base; and
DETERMINE the Reporting Standard MRS 120.0 Capital Base in the form set out in the Schedule, which applies to the financial sector entities referred to in paragraph 1 of the reporting standard.
Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those financial sector entities on the later of 30 June 2007 and the date of registration on the Federal Register of Legislative Instruments.
Dated 29 June 2007
[Signed]
Charles Littrell
Executive General Manager
Policy, Research and Statistics
Interpretation
In this Determination
APRA means the Australian Prudential Regulation Authority.
Schedule
Reporting Standard MRS 120.0 Capital Base comprises 12 pages commencing on the following page.
Reporting Standard MRS 120.0
Capital Base
| Objective of this reporting standard This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001. It requires medical defence organisations (‘MDOs’, as defined in paragraph 17)) to report to APRA on a half-yearly basis in relation to their Capital Base. This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with reporting form MRF 120.0 Capital Base and the instructions to that form (each of which is attached and forms part of this reporting standard). |
Application
This reporting standard applies to all MDOs.
Information required
An MDO must, after the end of each reporting period, and in accordance with the instructions, duly complete the form in respect of the reporting period, and provide the completed form (the ‘report’) to APRA by the due date.
Method of submission
Reports 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;
(b)in Microsoft Excel format on a 3.5 inch diskette, which must be posted to APRA’s head office at Level 26, 400 George Street, Sydney, NSW 2000; or
(c)manually completed on paper, which must be faxed or mailed to APRA’s head office.
Note: the Direct to APRA application software and forms may be obtained from APRA but will not be available immediately upon commencement of this standard. Therefore, initially, only methods of submission (b) and (c) will be available.
Reporting periods
Subject to paragraphs 5 and 6, the reporting periods are the half-yearly period ending on 30 June 2007 and each successive half-yearly period (ending on 31 December or 30 June) after that.
APRA may, by notice in writing, change the reporting periods for a particular MDO so that it is required to report in respect of half-yearly reporting periods based upon the MDO’s own year of income.
Note: this will be relevant where the MDO’s year of income does not end on 30 June or 31 December.
APRA may, by notice in writing change the reporting periods for a particular MDO to require it to provide the information:
(a)more frequently (APRA may require this when, having regard to the particular circumstances of the MDO, APRA considers it necessary or desirable for the MDO to report more frequently for the purposes of monitoring the financial position of the MDO); or
(b)less frequently (APRA may do so when, having regard to the particular
circumstances of the MDO and the extent to which its financial position
requires monitoring, it is unnecessary to require it to report on a half-yearly
basis).
Due dates
Reports under this standard must be provided to APRA no later than:
(a)in the case of a report in respect of a half-yearly period ending on the day of the MDO’s year of income – 4 months after that day; and
(b)in the case of all other reports – 20 business days after the end of the
reporting period.
APRA may, in writing, grant an MDO an extension of the due date for submission of a report, in which case the new due date will be the date on the notice of extension.
Audit and auditor’s certificate
Reports under this standard must be the product of processes and controls that have been reviewed and tested by a registered company auditor. 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 as to the accuracy and reliability of the data.
In relation to each year of income of an MDO (including a year of income ending on 30 June 2007), the MDO must provide APRA with an annual certificate, signed by a registered company auditor, which must either:
(a)state that in the auditor’s opinion the information provided to APRA under this standard in respect of the year of income is accurate and reliable; or
(b)state that in the auditor’s opinion the information provided to APRA under this standard in respect of the year of income is not accurate or reliable and specify the ways in which the information is not accurate or reliable and the grounds upon which the auditor has come to this conclusion.
A certificate under this paragraph must be provided to APRA no later than four months after the last day of the year of income to which it relates. It may be combined with certificates under corresponding paragraphs of other reporting standards (made under section 13 of the Financial Sector (Collection of Data) Act 2001) applying to the MDO.
Authorisation
Reports under this standard must also be subject to processes and controls developed by the MDO for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the MDO to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
If an MDO submits a report under this standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the MDO 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 a report under this standard is completed in Microsoft Excel format and provided on diskette, the diskette must be sent to APRA with a letter signed by either the Principal Executive Officer or Chief Financial Officer of the MDO.
If a report under this standard is completed and provided in paper form, it must be signed by either the Principal Executive Officer or Chief Financial Officer of the MDO.
Minor alterations to forms and instructions
APRA may make minor variations to:
(a)the form, and the instructions to the form, to correct technical, programming or logical errors, inconsistencies or anomalies; or
(b)the instructions, 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 affected MDOs in writing.
Interpretation
In this standard:
APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998.
business day means an ordinary business day, excluding weekends and public holidays.
Chief Financial Officer means the person having the function of chief financial officer of the MDO, by whatever name called, and whether or not he or she is a member of the governing board of the MDO, and if there is no such person means a person who performs similar functions to those commonly performed by a chief financial officer.
due date means the relevant date under paragraph 7 or 8.
form means the attached form.
instructions means the attached instructions.
MDO means a corporation to which section 5A of the Financial Sector (Collection of Data) Act 2001 applies (but, for the avoidance of doubt, does not include a general insurer within the meaning of the Insurance Act 1973).
Principal Executive Officer means the principal executive officer of the MDO for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the MDO.
registered company auditor has the meaning in section 9 of the Corporations Act 2001.
Note: That section provides that registered company auditor:
(a) means a person registered as an auditor under Part 9.2 of the Corporations Act; and
(b) in relation to a body corporate that is not a company—includes a person qualified to act as the body's auditor under the law of the body's incorporation.
report has the meaning given in paragraph 2.
reporting period means the relevant period under paragraph 4, 5 or 6
year of income in relation to an MDO means the accounting period adopted by the MDO for the purposes of the Income Tax Assessment Act 1936 or for taxation purposes generally (whether or not that period is the same as the standard financial year beginning on 1 July and ending on 30 June).
| Capital Instrument | |
| Tier 1 Capital | |
| 1 | Paid-up ordinary shares |
| 2 | Reserves |
| 3 | Retained profits or accumulated losses at the end of the reporting period |
| 4 | Technical provisions in excess of liability valuation |
| Less: | |
| 5 | Tax effect of excess technical provision (do not deduct tax effect if a Deferred tax asset has been recognised in relation to the excess technical provision) |
| 6 | Other Tier 1 capital instruments |
| 7 | Total Tier 1 Capital |
| Less Deductions (NOTE: enter as positive values): | |
| 8 | Goodwill |
| 9 | Identifiable Intangible Assets |
| 10 | Deferred Tax Assets (net of any Deferred Tax Liabilities) |
| 11 | Other deductions |
| 12 | Total Deductions from Tier 1 Capital |
| 13 | Adjusted Total Tier 1 Capital |
| Tier 2 Capital | |
| Upper Tier 2 Capital | |
| 14 | Asset revaluation reserve |
| 15 | Mandatory convertible notes and similar capital instruments |
| 16 | Perpetual subordinated debt |
| 17 | Total Upper Tier 2 Capital |
| Lower Tier 2 Capital | |
| Term subordinated debt maturing in: | |
| 18 | - 4 years or more |
| 19 | - 3 to less than 4 Years |
| 20 | - 2 to less than 3 Years |
| 21 | - 1 to less than 2 Years |
| 22 | - Less than 1 Year |
| Any other similar limited life capital instruments maturing in: | |
| 23 | - 4 years or more |
| 24 | - 3 to less than 4 Years |
| 25 | - 2 to less than 3 Years |
| 26 | - 1 to less than 2 Years |
| 27 | - Less than 1 Year |
| 28 | Total Lower Tier 2 Capital |
| 29 | Total Tier 2 Capital |
| 30 | Total Capital Base |
Reporting Form MRF 120.0
Capital Base
Instruction Guide
Introduction
This form requires Medical Defence Organisations (MDOs) to report information about their capital base.
Reporting Obligations
MDOs are required to report on a half-yearly basis (that is, six-monthly intervals), based on their financial year.
For annual reporting, MDOs must lodge a form within four months of the end of their financial year. The information required on an annual basis must be reported as at the last day of the reporting period on a financial year-to-date basis of the MDO.
For half-yearly reporting (that is, the half-year that does not correspond with the MDO’s financial year end), MDOs must lodge a form within 20 business days of the end of that six month period.
Audit Requirements
This form must be subject to audit review and testing on an annual basis or more frequently, if necessary, to enable the auditor to form an opinion on the accuracy and reliability of the data. The auditor must provide a certificate to the MDO specifying whether, in their opinion, the data provided by the MDO are reliable. The MDO must submit this certificate to APRA on an annual basis.
The scope and nature of audit testing required is outlined in the applicable Auditing and Assurance Guidance Statement issued by the Auditing and Assurance Standards Board.
Definitions
Definitions for data reporting items required by this form have been provided, where possible, in the instructions under the section headed ‘Specific Instructions’.
Basis of Preparation
Unit of Measurement
This form is to be prepared in thousands of Australian dollars (AUD). Amounts denominated in a currency other than Australian currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates (AASB 121).
Specific Instructions
Tier 1 Capital
Tier 1 capital comprises the highest quality capital instruments that are both permanent and non-cumulative in nature.
Paid-up ordinary shares
This item must correspond to paid-up ordinary share capital on issue reported in MRF 300.0 Statement of Financial Position (MRF 300.0).
Reserves
Report the total of all reserves reported in MRF 300.0 with the exception of the Asset Revaluation Reserve which is reported under Tier 2 capital.
Retained profits or accumulated losses at end of reporting period
This item must equal retained profits or accumulated losses at end of the reporting period as disclosed in MRF 310.0 Statement of Financial Performance (MRF 310.0).
Technical provisions in excess of liability valuation
Report the net (of reinsurance and other recoveries) value of Outstanding Claims Liabilities (OCL) recognised in MRF 300.0, that are in excess of the OCL required by MRF 210.0 Outstanding Claims Liabilities (MRF 210.0).
The net OCL is calculated as follows:
Gross OCL (as per MRF 300.0)
OCL (current) (item 18); plus
OCL (non-current) (item 26)
LESS
Sum of reinsurance and non-reinsurance recoveries, including input tax credits (as per MRF 300.0)
Total current net amounts recoverable on reinsurance contracts reported in item 2.3.15, that relate to claims recognised in the calculation of the OCL; plus
Total non-current net amounts recoverable on reinsurance contracts reported in item 7.2.15 that relate to claims recognised in the calculation of the OCL; plus
Total current net amounts recoverable other than reinsurance recoveries receivable that is reported in item 2.2.2.1, that relate to claims recognised in the calculation of the OCL; plus
Total non-current net amounts recoverable other than reinsurance recoveries receivable that is reported in item 7.1.2.1, that relate to claims recognised in the calculation of the OCL;
LESS
Sum of net OCL (as per MRF 210.0)
Net OCL as reported on MRF 210.0 .
Note: the total (net) OCL reported in MRF 300.0 cannot be less than the total (net) OCL reported in MRF 210.0. Accordingly, there can be no deficiency reported in this form.
Tax effect of excess technical provision (do not deduct tax effect if a Deferred tax asset has been recognised in relation to the excess technical provision)
Any excess of technical insurance provisions added back to Tier 1 capital must be adjusted for the tax effect (i.e. the corporate tax rate multiplied by the amount added back).
Note: this requirement is not mandating the recognition of a deferred tax asset in MRF 300.0.
The adjustment for the tax effect is not required where the excess technical insurance provision has been included in the recognition of a deferred tax asset associated with the recognition of Outstanding Claims Liabilities in MRF 300.0. Deducting the tax effect in this case would constitute double counting, as Deferred Tax Assets (DTA) are deducted from Tier 1 capital (net of any Deferred Tax Liabilities (DTL)).
Other Tier 1 capital instruments
Report any other high quality capital instruments.
Deductions from Tier 1 Capital
Assets of an identifiable intangible nature like goodwill and any net deferred tax assets net of any deferred tax liabilities) are to be deducted from Total Tier 1 capital in the line items provided. These are explained further below.
Total Tier 1 capital
Report the sum of items 1 to 6.
Goodwill
The value of goodwill that is to be reported in this line item is the sum of the following:
the total value of goodwill as recognised in item 11.1 minus the impaired amount reported in item 11.2 in MRF 300.0 ; plus
the component of the value of ‘total other investments’ (i.e. investments in controlled entities) which represents purchased goodwill (i.e. current value less value of identifiable net tangible assets). This is a component of the value of investments in controlled entities reported in item 9.2 of MRF 300.0.
Identifiable intangible assets
Report the value of any intangible assets recognised in item 11.3 minus the impaired/amortised amount reported in item 11.4 in MRF 300.0. The value reported must equate to the net balance of identifiable intangible assets.
Deferred tax assets (net of any deferred tax liabilities)
Report the value of DTA recognised in MRF 300.0, net of DTL that are also recognised in MRF 300.0. The value reported must not be negative (i.e. a net DTL balance after deducting DTA). If the balance of DTL exceeds DTA, zero must be reported.
Other deductions
Deduct other Tier 1 capital deductions which may be required by APRA eg surplus on defined benefit funds, net unrealised gains (losses) on effective cash flow hedges
Total Deductions from Tier 1 Capital
The sum of items 8 to 11.
Adjusted Total Tier 1 Capital
Report item 7 Total Tier 1 capital less item 12 Total Deductions from Tier 1 capital.
Tier 2 Capital
Tier 2 comprises instruments that may be of limited life and/or have on-going servicing obligations.
Asset revaluation reserve
The amount of these reserves to be included in Upper Tier 2 is limited to 45% of pre-tax revaluation reserves.
Mandatory convertible notes and similar capital instruments
Report any mandatory convertible notes and similar capital instruments.
Perpetual subordinated debt
Report any perpetual subordinated debt.
Total Upper Tier 2 Capital
Report the sum of items 14 to 16.
18 - 22 Term subordinated debt
Report any term subordinated debt according to when it matures.
23 - 27. Any other similar limited life capital instrument
Report any other similar limited life capital instruments according to when they mature.
28. Total Lower Tier 2 Capital
Report the sum of Lower Tier 2 Capital items 18 to 27.
Total Tier 2 Capital
Report the sum of item 17 Total Upper Tier 2 Capital to item 28 Total Lower Tier Capital.
Total Capital Base
Report the sum of item 7 Total Tier 1 and item 29 Total Tier 2 Capital.
0
0
0