6Paragraph Aus2.1 is added. Paragraph 2 is not amended but is included for reference.

6                        Paragraph Aus2.1 is added. Paragraph 2 is not amended but is included for reference.

Objective

…

2 An entity shall consider its substantive rights and obligations, whether they arise from a contract, law or regulation, when applying AASB 17. A contract is an agreement between two or more parties that creates enforceable rights and obligations. Enforceability of the rights and obligations in a contract is a matter of law. Contracts can be written, oral or implied by an entity’s customary business practices. Contractual terms include all terms in a contract, explicit or implied, but an entity shall disregard terms that have no commercial substance (ie no discernible effect on the economics of the contract). Implied terms in a contract include those imposed by law or regulation. The practices and processes for establishing contracts with customers vary across legal jurisdictions, industries and entities. In addition, they may vary within an entity (for example, they may depend on the class of customer or the nature of the promised goods or services).

Aus2.1 For a public sector entity to determine whether, in substance, there is a contract, it is necessary to identify all the relevant sources of the terms of an arrangement, whether they arise from a contract, law or regulation. In a public sector context, a contract may exist by virtue of some or all of the substantive rights and obligations for an insurance arrangement being set out in law or regulation. In some cases, there may also be separate contracts between the public sector entity and individual policyholders or a policyholder group. In other cases, there may be little or no separate documentation between the public sector entity and an individual policyholder or policyholder group.