Financial Sector (Collection of Data) (reporting standard) determination No. 11 of 2009 LRS 340.0 Retained Profits (Cth)
Financial Sector (Collection of Data) (reporting standard) determination No. 11 of 2009
Reporting standard LRS 340.0 Retained Profits
Financial Sector (Collection of Data) Act 2001
I, John Roy Trowbridge, 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 Reporting Standard LRS 340.0 Retained Profits made by Financial Sector (Collection of Data) (reporting standard) determination No. 26 of 2007 (the old standard); and
DETERMINE Reporting Standard LRS 340.0 Retained Profits in the form set out in the Schedule (the new standard), which applies to the financial sector entities to the extent provided in paragraph 2 of the reporting standard.
Under section 15 of the Act, I DECLARE that the new standard shall begin to apply to those financial sector entities, and the old standard shall cease to apply, on the later of 1 October 2009 and the date of registration of this instrument on the Federal Register of Legislative Instruments.
Dated 17 July 2009
[Signed]
John Trowbridge
Member
Interpretation
In this Determination
APRA means the Australian Prudential Regulation Authority.
Federal Register of Legislative Instruments means the register established under section 20 of the Legislative Instruments Act 2003.
Schedule
Reporting Standard LRS 340.0 Retained Profits comprises 12 pages commencing on the following page.
Reporting Standard LRS 340.0
Retained Profits
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001. It requires all registered life insurance companies to report to APRA, in general, on a quarterly and an annual basis in relation to retained profits.
This reporting standard outlines the overall requirements for the provision of relevant information to APRA. It should be read in conjunction with:
Form LRF 340.1 Retained Profits (SF and SF Eliminations); and
Form LRF 340.2 Retained Profits (SF Total, SHF, SH Elim, Entity);
and the associated instructions (all of which are attached and form part of this reporting standard).
Purpose
Information collected in Forms LRF 340.1 Retained Profits (SF and SF Eliminations (LRF 340.1) and LRF 340.2 Retained Profits (SF Total, SHF, SH Elim, Entity) (LRF 340.2) is used by APRA for the purpose of prudential supervision, including assessing compliance with prudential standards where appropriate. It may also be used by the Reserve Bank of Australia, the Australian Bureau of Statistics and the Australian Securities and Investments Commission.
Application and commencement
This reporting standard applies to all life insurance companies including friendly societies (together referred to as life companies) registered under the Life Insurance Act 1995 (Life Insurance Act) for reporting periods commencing on or after 1 October 2009.
Information required
A life company must provide APRA with the information required by Forms LRF 340.1 and LRF 340.2 for each reporting period.
Note: The instructions for Forms LRF 340.1 and LRF 340.2 explain in more detail the information that is required.
The quarterly information required to be provided to APRA under this reporting standard is not intended to form part of the financial statements, within the meaning of section 124 of the Life Insurance Act, given by the life company to APRA. The annual information required to be provided to APRA under this reporting standard in intended to form part of the annual return, within the meaning of section 124 of the Life Insurance Act, given by the life company to APRA.
Method of submission
The information required by this reporting standard must be given to APRA either:
(a) in electronic form using the ‘Direct to APRA’ application, applying one of the electronic submission mechanisms under that application; or
(b) by completing Forms LRF 340.1 and LRF 340.2 on paper and mailing the completed form to APRA
Note: The ‘Direct to APRA’ application software and paper forms may be obtained from APRA.
Reporting periods and due dates
Subject to paragraph 7, a life company must provide the information required by this reporting standard:
(a) in unaudited form - in respect of each quarter based on the financial year
of the life company; and
(b) in audited form - in respect of each financial year of the life company.
Note 1: This means that these forms will be submitted five times for a full financial year.
Note 2: The annual audited form must be submitted in conjunction with the annual auditor’s report, as required under Prudential Standard LPS 310 Audit and Actuarial Requirements.
APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular life company, to require it to provide the information required by this reporting standard more frequently, or less frequently, having regard to:
(a)the particular circumstances of the life company;
(b)the extent to which the information is required for the purposes of the prudential supervision of the life company; and
(c)the requirements of the Reserve Bank of Australia or the Australian Bureau of Statistics or the Australian Securities and Investments Commission.
The quarterly information required by this reporting standard in unaudited form must be provided to APRA within 20 business days after the end of the reporting period to which the information relates. The annual information required by this reporting standard in audited form must be provided to APRA within four months after the end of the reporting period to which the information relates.
APRA may grant a life company 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 a life company under this reporting standard must be the product of processes and controls that have been reviewed and tested by the auditor of the life company.
All information provided by a life company under this reporting standard must be subject to processes and controls developed by the life company for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the life company to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
Actuarial valuations and calculations included in, or used in the preparation of, the information provided to APRA must be in accordance with the prudential standards in force for the reporting period. However, life companies may use reasonable estimates when preparing information that will not be audited (i.e. for the first four submissions of information for a full financial year). The instructions to Forms LRF 340.1 and LRF 340.2 include general principles on the use of estimates.
Authorisation
If the officer of a life company provides the information required by this reporting standard:
(a)using Direct to APRA (D2A), the officer must digitally authorise, submit the data to APRA and receive a D2A receipt number for the information to be considered given to APRA. APRA will issue ‘digital certificates’ to officers of the life company who have authority to transmit the data to APRA; or
(b)on paper, the relevant completed forms must be signed on the front page by the principal executive officer or chief financial officer of the life company.
Note: Information in draft returns saved at APRA using D2A will not be considered to be provided to APRA for the purposes of the life company's obligations under this reporting standard.
Transitional
A life company must report in relation to a reporting period ending prior to 1 October 2009 in accordance with the reporting standard that this reporting standard replaces rather than under this reporting standard.
Interpretation
In this reporting standard:
business days means ordinary business days, exclusive of Saturdays, Sundays or public holidays;
principal executive officer means the principal executive officer of the life company for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the entity;
reporting period means a reporting period under paragraph 6 or, if applicable, paragraph 7.
A reference to a prudential standard means the prudential standard made under section 230A of the Life Insurance Act mentioned in the reference, as amended from time to time. If the prudential standard has been revoked and replaced, the reference shall be taken to be to the prudential standard that has replaced it.
Reporting Forms LRF 340.1 and LRF 340.2
Retained Profits
Instruction Guide
Introduction
Forms LRF 340.1 Retained Profits (SF and SF Eliminations) (LRF 340.1) and LRF 340.2 Retained Profits (SF Total, SHF, SH Elim, Entity) (LRF 340.2) provides APRA with the necessary information on the development and disposition of retained profits as a key element in assessing the financial position of a life insurance company, and assists APRA in its supervision of compliance with the requirements of the Life Insurance Act 1995. Information that this form contains will also facilitate APRA’s overview of particular industry trends.
This Instruction Guide is designed to assist reporting entities in the completion of LRF 340.1 and LRF 340.2. The Instruction Guide provides:
·general directions and notes regarding preparation and lodgement; and
·instructions relating to specific items.
General directions and notes
Reporting levels
LRF 340.1 and LRF 340.2 must be completed by all life insurance companies, including friendly societies.
The forms are to be completed for each statutory fund (approved benefit fund) and shareholders’ fund (management fund), including eliminations between these funds.
Report each statutory fund (approved benefit fund) return separately, and (if applicable) complete ‘Statutory Fund Eliminations’ under LRF 340.1.
Report shareholders’ fund (management fund) return and (if applicable) complete ‘Shareholder Eliminations’ under LRF 340.2. ‘Total Statutory Funds’ (allowing for eliminations) and ‘Total Entity’ results will then be calculated automatically by derivations contained within LRF 340.2.
For each Statutory Fund, reporting items are required in the following breakdowns:
1.Australian Business – Policy Owner interests;
2.Australian Business – Shareholder interests;
3.Overseas Business – Policy Owner interests; and
4.Overseas Business – Shareholder interests.
Unit of measurement
LRF 340.1 and LRF 340.2 are to be prepared in thousands of Australian dollars (AUD). Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates.
Definitions
Definitions for data reporting items required by these forms have been provided where appropriate in the instructions under the section headed ‘Instructions for specific items’.
Definitions, unless specified, apply to all life insurance companies, including friendly societies as if each reference to a statutory fund, or shareholders’ fund, were a reference to an approved benefit fund, or management fund, respectively. Likewise, reference to shareholders should be taken to embrace ‘members’ of a mutual association and/or a society. The term ‘life companies’ or ‘life insurance companies’ includes friendly societies unless stated otherwise. This is in line with the usage of terms in the Life Insurance Act 1995.
Reporting period
Life companies are required to report the information in the reporting forms on a quarterly and annual basis.
·The quarterly information is to be completed in respect of the year to date period up to the end of each quarter based on the financial year of the life company, not the calendar year.
·The annual information is to be completed in respect of the financial year of the life company.
·The financial information requested in these forms is to be reported for the year to date period up to the close of business on the last day of the reporting period.
Basis of preparation
In completing this forms, unless specifically stated otherwise, institutions are to follow the basis that is used for the preparation of the annual financial statements in accordance with the Australian accounting standards, specifically in regard to the:
·interpretation/definition of specific revenue (profit) items; and
·appropriate measurement basis for revenue items.
All assets of a statutory fund are to be measured at Fair Value, with movements in Fair Values recognised in Profit or Loss and reported as revenue or expense in this form.
Actuarial valuations and calculations included in, or used in the preparation of, the forms must be in accordance with prudential standards. APRA recognises that for some periods life insurance companies may not carry out full accounting, actuarial valuation and audit procedures or do so in sufficient time to report on the return (for quarterly returns). Where this applies, some estimation could be applied reasonably at the current quarter to determine an approximation to the results that would be obtained if full detailed valuations had been carried out.
APRA expects that all life companies will utilise their best endeavours to ensure that any estimations are a good and reasonable basis of approximation. The estimation process needs to be sufficiently rigorous in order to be acceptable and at a minimum should be of a standard that would be considered appropriate for use in reporting to management and the Board of directors.
If additional clarification is required for specific asset items in these forms, reference should be made to the section ‘Instructions for specific items’, which is provided as a guide.
For the purposes of reporting under these forms, contracts are to be classified in accordance with Prudential Standard LPS 350 Contract Classification for the Purpose of Regulatory Reporting to APRA.
Instructions for specific items
While these instructions apply to all life insurance companies, including friendly societies, not all items may be applicable to both: some items may not be applicable to friendly societies while others may not be applicable to life insurers.
Column headings – Australian/Overseas business:
This refers to the territory where the life insurance business is carried on, as defined in the Life Insurance Act 1995. In most cases ‘Total Business’ values are derived items, the exception being Total Shareholder Retained Profits at Beginning of Year.
Column headings – Policy owner interests/Shareholder interests:
This refers to the components of each item being reported as an item of profit that is attributable to the interests of Policy Owners vs. Shareholders respectively. All ‘Total Amounts’ results are derived items.
NOTE: Without prejudice, Unallocated Benefit Fund reserves are to be treated as attributable to the interests of Policy Owners for the purposes of this form.
Life Insurance Act Retained Profits at End of Prior Financial Year
This is the ‘brought forward’ result. i.e. this amount should equal retained profits at the end of the previous reporting period.
Profit/(Loss) After Tax for period:
This section provides a derivation of Operating Profit which is specifically defined in the Life Insurance Act 1995 – refer Division 5 of Part 4 (Sections 56-60) for life insurers other than Friendly Societies. A simpler regime, which is still catered for in this return, applies to a friendly society.
2.1.Profit/(Loss) after Income Tax attributable to Shareholders
This item for LRF 340.1 and LRF 340.2 comes directly from Item 19 on LRF 310.1 Statement of Financial Performance (SF and SF Eliminations) and LRF 310.2 Statement of Financial Performance (SF Total, SHF, SH Elim, Entity) respectively.
2.2.Interim & Terminal Bonuses on Claims Paid
This item is only attributable to the interests of policy owners. Therefore, only enter values under ‘Policy Owner interests’ columns.
2.3.Declared Bonuses on In Force Policies
Declared bonuses valued in accordance with Prudential Standard LPS 1.04 Valuation of Policy Liabilities (LPS 1.04).
Only report under ‘Policy Owner interests’ columns.
2.4.Increase/(Decrease) in Policy Owner Retained Profits
Only report under ‘Policy Owner interests’ columns.
2.5.Increase/(Decrease) in Unallocated Benefit Fund reserves
As noted above, Unallocated Benefit Fund reserves are to be treated as attributable to the interests of Policy Owners for the purposes of this form. This item only applies to friendly societies.
2.6.Life Insurance Act Operating Profit After Tax for period [derived item]
This is the sum of the items above (items 2.1 to 2.5) and is automatically calculated by derivations contained within the forms.
Transfers in period:
These items affect the development and/or disposition of retained profits, and are to be reported in the following separate components:
3.2.To other Statutory Funds
Transfers to other Statutory Funds should be shown as a negative number.
3.3.From Shareholders’ Funds
For each statutory fund, this amount should be shown as a positive number.
For Shareholders’ fund (under LRF 340.2), this is an outward transfer and therefore should be shown as a negative number.
3.4.To Shareholders’ Funds – from Participating Business
Only expected to be applicable to life companies other than friendly societies.
Similar to item 3.3, as this is an outward transfer from statutory fund to shareholders’ fund, a negative amount should be reported under LRF 340.1 for each statutory fund.
Given that it is an inward transfer for shareholders’ fund, this should be shown as a positive number under LRF 340.2.
3.5.To Shareholders’ Funds – from Non-participating Business
See item 3.4.
3.6.To/from foreign currency translations
It should be shown as a positive/negative number if it is an inward/outward transfer.
3.7.To/from Reserves
See item 3.6.
3.8.Other transfers / Dividends
Enter the net amount, include all other inward and outward transfers not specifically categorised above. For LRF 340.2 use this field to report dividends paid from the Shareholders’ Fund.
3.9.Total Transfers in period [derived item]
This is the sum of items 3.1 to 3.8, and is automatically calculated by derivations contained within the form.
Life Insurance Act Retained Profits at End of Period [derived item]
This is calculated automatically by derivations contained within the forms.
Annual Return Reconciliations
Reconciliation to Retained Profit at the end of the period in the general purpose financial statements is only required to be completed as part of the annual returns.
Reconciliation adjustments
This is the adjustment necessary to reconcile Life Insurance Act Retained Profits at End of Period (item 5) to the Retained Profits, per general purpose accounts – Balance Sheet (item 7). APRA does not propose to routinely collect the components of the reconciliation. Additional information may, however, be sought from the life companies where this figure is significant.
Retained Profits, per general purpose accounts – Balance sheet
This is the corresponding figure to the Life Insurance Act Retained Profits at End of Period (item 5), except that it is taken from the general purpose accounts of the entity.
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0
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