Financial Sector (Collection of Data) (reporting standard) determination No. 11 of 2010 - GRS 400 (2010) - Supplementary Reporting Information
(8) Fair Value of Controlled Entity(8) Fair Value of Controlled Entity
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Interest in Controlled Entities and Joint Ventures
Instruction Guide
Introduction
GRF 450.0 – Interest in Controlled Entities and Joint Ventures captures information on the reporting insurer’s interest in controlled entities, joint venture entities and joint venture operations.
Audit requirements
The information provided under the form is not required to be audited and has been exempted from the definition of ‘yearly statutory accounts’.
Reporting entities
Forms are to be completed for the following reporting entities where appropriate:
Authorised insurance entities (including mutuals); and
Authorised reinsurance entities.
Unit of measurement
This form is to be presented in Australian currency, rounded to thousands of dollars, with no decimal place. Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ (AASB 121).
The general requirements of AASB 121 for translation are:
Foreign currency monetary items[10] outstanding at the reporting date must be translated at the spot rate[11] at the reporting date.
Foreign currency non-monetary items[12] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
Foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.
Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’ (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB.
For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.
As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.
Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.
The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.
Translation of financial reports of foreign operations.
A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.
Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
Translation of financial reports should otherwise follow the requirements in AASB 121.
Basis of preparation
Insurers are requested to follow the recognition and measurement basis required by the APRA forms for the purposes of completing this form.
Reporting period
Insurers are required to report the information in the reporting form on an annual basis.
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.
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 Reporting Standard GRS 450.0 Interest in Controlled Entities and Joint Ventures.
Specific instructions
This form is separated into the following parts:
Part A: Interest in Controlled Entities
Part B: Interest in Joint Venture Operations / Entities
The requirements for each of these are detailed below:
Part A: Interest in Controlled Entities
For the purposes of this form, ‘entity’ means any legal, administrative, or fiduciary arrangement, organisational structure or other party (including a person) having the capacity to deploy scarce resources in order to achieve objectives.
For the purposes of this form, ‘controlled entities’ is to be interpreted as defined in AASB 127 ‘Consolidated and Separate Financial Statements’ (AASB 127). AASB 127 defines a ‘subsidiary’ as meaning an entity, including an unincorporated entity, which is controlled by a parent entity. A parent is an entity that has one or more subsidiaries.
(1) Name of Controlled Entity
Report the full name of the controlled entity.
(2) Description / Nature of Business
In the space provided, detail a brief description of the main business conducted by the entity.
(3) APRA Regulated General Insurer
If the controlled entity is an APRA regulated general insurance entity input ‘yes’.
If the controlled entity is an APRA regulated general insurance entity, then details on exposure of gross assets and gross liabilities in the various countries/geographical regions does not need to be completed.
(4) Country of Incorporation
This is the country in which the entity is incorporated.
(5) Ownership Percentage %
Disclose the percentage of the reporting insurer ownership of shares or units of the controlled entity.
(6) Fair Value of Investment in Controlled Entity
Disclose the fair value of the investment of the reporting insurer in the controlled entity. Fair value is 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 (i.e. bid or ask price) in an active and liquid market; 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 – a realistic estimate of fair value on the basis of the results of a valuation technique that makes maximum use of market inputs, and relies as little as possible on entity-specific inputs.
(7) Goodwill net of impairment or Intangible Component of Investment in Controlled Entity
Disclose that component value of the reporting insurer’s investment in the controlled entity that comprises goodwill net of impairment and other forms of intangible assets.
(8) Fair Value of Controlled Entity
Disclose the fair value of the controlled entity. Fair value is 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 (i.e. bid or ask price) in an active and liquid market; 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 – a realistic estimate of fair value on the basis of the results of a valuation technique that makes maximum use of market inputs, and relies as little as possible on entity-specific inputs.
(9) Country (for which Gross Assets & Liabilities are reported)
The countries/regions listed on the form are:
Australia;
New Zealand;
USA;
UK;
South East Asia (Excluding Japan);
Continental Europe; and
Other.
(10) & (11) Disclosure of Gross Assets and Gross Liabilities
Disclose ‘Gross Assets’ and ‘Gross Liabilities’ reported by country or geographic region specified on the form. This is based on where the assets are invested and liabilities are located. Enter the relevant details for each country/region as appropriate.
Do not disclose this information if the controlled entity is an APRA regulated general insurer. This type of information is reported in GRF 400.0 Statement of Risk by Country.
Part B: Interest in Joint Venture Operations / Entities
For the purposes of this form, the reference to joint venture includes a joint venture entity and a joint venture operation. Joint venture entity and joint venture operation is to be interpreted as defined in AASB 131 ‘Interests in Joint Ventures’ (AASB 131). An extract of the definition in AASB 131 is provided below:
Joint venture means a contractual arrangement whereby two or more parties undertake an economic activity, which is subject to joint control.
Joint ventures take many forms and structures. This standard identifies three broad types - jointly controlled operations, jointly controlled assets and jointly controlled entities.
The following characteristics are common to all join ventures:
(a) two or more venturers are bound by a contractual arrangement; and
(b) the contractual arrangement establishes joint control
Jointly controlled operations involves the use of assets and other resources of the venturers rather than the establishment of a corporation, partnership or other entity, or a financial structure that is separate from the venturers themselves.
Jointly controlled assets involve the joint control or joint ownership by the venturers of one or more assets contributed or acquired to the purpose of the joint venture
Jointly controlled entities involve the establishment of a corporation, partnership, or other entity in which each venturer has an interest.
(1) Name of Joint Venture
Report the full name of the joint venture.
(2) Description / Nature of Main Business
In the space provided, detail a brief description of the main business conducted by joint venture.
(3) APRA Regulated General Insurer
If the joint venture is an APRA regulated general insurance entity input ‘yes’.
If the joint venture is an APRA regulated general insurance entity, then details on exposure of gross assets and gross liabilities in the various countries/geographical regions as required by the form does not need to be completed.
(4) Country of Incorporation
This is the country in which the joint venture is incorporated.
(5) Ownership Percentage or Interest in Joint Venture %
Disclose the percentage of the reporting insurer ownership or interest in the joint venture.
(6) Fair Value of Investment / Interest in Joint Venture
Disclose the fair value of the investment/interest of the reporting insurer in the Joint Venture. Fair value is 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 (i.e. bid or ask price) in an active and liquid market; 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 – a realistic estimate of fair value on the basis of the results of a valuation technique that makes maximum use of market inputs, and relies as little as possible on entity-specific inputs.
(7) Goodwill net of impairment or Intangible Component of Investment in Joint Venture
Disclose that component value of the reporting insurer’s investment/interest in the joint venture that comprises goodwill net of impairment and other forms of intangible assets.
(8) Fair Value of Joint Venture
Disclose the fair value of the joint venture. Fair value is 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 (i.e. bid or ask price) in an active and liquid market; 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 – a realistic estimate of fair value on the basis of the results of a valuation technique that makes maximum use of market inputs, and relies as little as possible on entity-specific inputs.
(9) Net Income Recognised from Interest in Joint Venture
Disclose the net income recognised from the reporting insurer’s interest in the joint venture.
(10) Country (for which Gross Assets and Liabilities is reported)
The countries/regions listed on the form are:
Australia;
New Zealand;
USA;
UK;
South East Asia (Excluding Japan);
Continental Europe; and
Other.
(11) & (12) Disclosure of Gross Assets and Gross Liabilities
Disclose the ‘Gross Assets’ and ‘Gross Liabilities’ reported by country or geographic region specified on the form. This is to be based on where the assets are invested and liabilities are located. Enter the relevant details for each country/region as appropriate.
Do not disclose this information if the joint venture is an APRA regulated general insurer.