Financial Sector (Collection of Data) (reporting standard) determination No. 22 of 2023
4. Basis of preparation4. Basis of preparation
Start here
Get a plain-English read of 4. Basis of preparation
Turn the raw legal text into a practical explanation grounded in Financial Sector (Collection of Data) (reporting standard) determination No. 22 of 2023.
This Reporting Standard sets out the general instructions for providing information under reporting standards, including the periods within which information required under reporting standards must be provided to APRA.
Authority
This Reporting Standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001.
Purpose
Reporting standards made under section 13 of the Financial Sector (Collection of Data) Act 2001 require financial sector entities to provide information to APRA. This Reporting Standard provides instructions applicable to all reporting standards to be completed by certain entities and specifies the periods within which those entities are to comply with those requirements.
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. This Reporting Standard applies for reporting periods ending on or after 1 April 2023.
General Instructions
Detailed instructions for the individual reporting items are included in the specific instructions for each reporting form. These specific instructions need to be considered in conjunction with the General Instruction Guide (which are Attachment A to this Reporting Standard), the relevant reporting standards and the prudential standards.
Periods for Provision of Returns
A life company is to provide information required under reporting standards:
(a) in the case of quarterly information - 20 business days after the end of the reporting period to which the information relates; and
(b) in the case of annual information:
(i) for reporting periods ending on or after 1 January 2013 but before 1 January 2015 - four months after the end of the reporting period to which the information relates; and
(ii) for reporting periods ending on or after 1 January 2015 - three months after the end of the reporting period to which the information relates.
APRA may, in writing, grant a life company an extension of a due date in paragraph 5, for all or specified reporting standards, in which case the new due date will be the date on the notice of extension.
Interpretation
In this reporting standard:
Part 4. Basis of preparation - Financial Sector (Collection of Data) (reporting standard) determination No. 22 of 2023 - 4. Basis of preparation | Zoe
annual information means information required to be provided in respect of each financial year of a life company;
financial year has the meaning in the Corporations Act 2001; and
quarterly information means information required to be provided in respect of each quarter based on the financial year of a life company.
ATTACHMENT A
Life Insurance Reporting Requirements
General Instruction Guide
1. Introduction
The General Instruction Guide is intended to assist in the completion and lodgement of the reporting forms required to be lodged with APRA under the Reporting Standards made under section 13 of the Financial Sector (Collection of Data) Act 2001 by companies registered under the Life Insurance Act 1995. In this document 'life company' means any company registered under the Act, including a friendly society. References to 'life insurers' apply to life companies other than friendly societies.
Detailed instructions for the individual reporting items are provided in the specific instructions for each reporting form. These specific instructions need to be considered in conjunction with this document, the relevant reporting standards and prudential standards[1].
These General Instruction Guide covers all the reporting forms for life companies:
2. Reporting level
This section details the reporting levels for completion of each reporting form. Reporting is required in respect of:
Each statutory fund for a life insurer and each approved benefit fund for a friendly society;
The shareholder fund for a life insurer and the management fund for a friendly society; and
The licensed insurer (i.e. company as whole for both life insurers & friendly societies).
Form
Notes
LRF 110.1 andLRF 110.2
LRF 110.1 and LRF 110.2 must be completed by all life companies.LRF 110.1 must be completed for each statutory fund (approved benefit fund) and shareholders’ fund (management fund).LRF 110.2 must be completed at the licensed insurer level.
LRF 112.0;LRF 112.1; andLRF 112.2
LRF 112.0, LRF 112.1 and LRF 112.2 must be completed by all life companies.LRF 112.0 must be completed for each statutory fund (approved benefit fund). LRF 112.1 must be completed for the shareholders’ fund (management fund). LRF 112.2 must be completed at the licensed insurer level.
LRF 112.3
LRF 112.3 must be completed by all life companies.The form must be completed for each statutory (approved benefit fund) and the shareholders’ fund (management fund).
LRF 114.0
LRF 114.0 must be completed by all life companies.The form must be completed for each statutory fund (approved benefit fund) and the shareholders’ fund (management fund).
LRF 114.2
LRF 114.2 must be completed by all life companies.The form must be completed for each statutory fund (approved benefit fund) that does not write investment linked business. Funds writing only investment linked business do not need to complete this form.
LRF 114.3
LRF 114.3 must be completed by all life companies.The form must be completed for each statutory fund (approved benefit fund) that does not write investment linked business. Funds writing only investment linked business do not need to complete this form.
LRF 115.0; andLRF 115.1
LRF 115.0 must be completed by all life companies. LRF 115.1 needs to be completed by friendly societies only.LRF 115.0 must be completed separately for each statutory fund. Approved benefit funds that do not write investment linked business also need to complete LRF 115.0. Note that it is not mandatory to complete LRF 115.0 on a quarterly basis. Refer to the specific reporting instruction for details.LRF 115.1 must be completed for the management fund of the friendly societies.
LRF 117.0
LRF 117.0 must be completed by all life companies.The form must be completed for the shareholders’ fund (management fund) and each statutory fund (approved benefit fund) which does not write investment linked business. Funds providing only investment linked business do not need to complete this form.
LRF 118.0
LRF 118.0 must be completed by all life companies.The form must be completed for each statutory fund (approved benefit fund) of life insurers and the management fund of friendly societies.In completing LRF 118.0 for the management fund, friendly societies must submit the information based on business activities across all approved benefit funds. Refer to the specific reporting instructions for details.
LRF 200.0
LRF 200.0 must be completed by life insurers only. Friendly societies do not need to complete this form.The form is to be completed separately for each statutory fund.As set out in the form, data items are to be completed for each APRA product group (as defined in this document).In section 1 and section 2 of this form, it is not mandatory for life insurers to update the information on a quarterly basis. Refer to specific reporting instructions for details.
LRF 300.1; andLRF 300.2
LRF 300.1 and LRF 300.2 must be completed by all life companies.The forms must be completed for each statutory fund (approved benefit fund) and the shareholders’ fund (management fund) and must include eliminations between these funds.LRF 300.1 must be submitted for each statutory fund (approved benefit fund) separately and if applicable the ‘Statutory Fund Eliminations’ must be reported under LRF 300.1.LRF 300.2 must be submitted for the shareholders’ fund (management fund) return and if applicable the ‘Shareholder Eliminations’ must be reported under LRF 300.2.‘Total Statutory Funds’ (allowing for eliminations) and ‘Total Entity’ results will be calculated automatically in LRF 300.2.
LRF 310.1; andLRF 310.2
LRF 310.1 and LRF 310.2 must be completed by all life companies.LRF 310.1 must be submitted for each statutory fund (approved benefit fund) separately and if applicable the ‘Statutory Fund Eliminations’ must be reported under LRF 310.1.LRF 310.2 must be submitted for the shareholders’ fund (management fund) return and if applicable the ‘Shareholder Eliminations’ must be reported under LRF 310.2.‘Total Statutory Funds’ (allowing for eliminations) and ‘Total Entity’ results will be calculated automatically in LRF 310.2.
LRF 330.0
LRF 330.0 must be completed by life insurers only. Friendly societies do not need to complete this form.The form must be submitted for each statutory fund.Where relevant in the form, data items must be submitted for each APRA product group (as defined in this document).
LRF 340.1; andLRF 340.2
LRF 340.1 and LRF 340.2 must be completed by all life companies.The forms must be completed for each statutory fund (approved benefit fund) and shareholders’ fund (management fund) and must include eliminations between these funds.LRF 340.1 must be submitted for each statutory fund (approved benefit fund) and if applicable the ‘Statutory Fund Eliminations’ must be reported under LRF 340.1LRF 340.2 must be submitted for the shareholders’ fund (management fund) and if applicable the ‘Shareholder Eliminations’ must be reported under LRF 340.2.‘Total Statutory Funds’ (allowing for eliminations) and ‘Total Entity’ results will be calculated automatically in LRF 340.2.For data reported in LRF 340.1 by statutory fund (approved benefit fund), a breakdown of the data items is required by geographic location (Australia or overseas) and whether these data items are designated as being attributable to policy owner interests or shareholder interests.
LRF 400.0
LRF 400.0 must be completed by all life companies.The form must be completed for each statutory fund (approved benefit fund).Where relevant in the form, data items must be completed for each APRA product group (as defined in this document). Some of these data items will be collected on the following three bases:‘This Year’ – current position, based on current year’s valuation basis;‘Last Year’ – current position, based on previous year’s valuation basis; and‘LY/TY’ – current position, based on previous year’s valuation basis, except substituting current year’s investment and economic assumptions.
LRF 420.0
LRF 420.0 must be completed by life insurers only. Friendly societies do not need to complete this form.The form is to be completed separately for each statutory fund.Where relevant in the form, data items are to be completed for each APRA product group (as defined in this document).
LRF 430.0
LRF 430.0 must be completed by all life companies.The form is to be completed for each statutory fund (approved benefit fund).Where relevant in the form, data items must be completed for each APRA product group (as defined in this document).
3. Reporting period and timing of submission
Life companies are required to submit the following forms on both a quarterly and an annual basis:
LRF 110.1 and LRF 110.2;
LRF 112.0, LRF 112.1, LRF 112.2, and LRF 112.3;
LRF 114.0, LRF 114.2, and LRF 114.3;
LRF 115.0 and LRF 115.1;
LRF 117.0;
LRF 118.0;
LRF 200.0.
LRF 300.1 and LRF 300.2;
LRF 310.1 and LRF 310.2;
LRF 330.0;
LRF 340.0; and
Life companies are required to submit the following forms on an annual basis only:
LRF 400.0;
LRF 420.0; and
LRF 430.0.
The times at which for the reporting forms must be lodged is as follows:
forms requiring the reporting of quarterly information must be completed as at the end of each quarter based on the financial year of the life company (not the calendar year); and
forms requiring the reporting of annual information must be completed as at the end of the financial year of the life company
The financial information required to be reported must be reported as at the close of business for the last day of the reporting period, or for the year to date period up to the close of business on the last day of the reporting period, as relevant.
4. Basis of preparation
4.1. General accounting basis
In completing the forms covered by this document, unless otherwise stated specifically, reporting life companies including friendly societies are to follow the basis consistent with the relevant Australian Accounting Standards. In particular, appropriate consideration must be given to the interpretation, the basis for measurement, and the netting between revenues/expenses items and financial assets/liabilities.
4.2. Actuarial valuation basis
All actuarial valuations and calculations included in, or used in the preparation of the forms covered by this document must be performed in accordance with the relevant prudential standards. The determination of policy liabilities as reported in the Statement of Financial Position must be in accordance with Prudential Standard LPS 340 Valuation of Policy Liabilities (LPS 340).
APRA recognises that full actuarial and other valuation procedures may not be used for valuing policy liabilities in all reporting periods. In such cases, reasonable estimation may be applied for valuing the policy liabilities and such estimation needs to be based on the detailed valuation procedures. It must be noted that where such estimation processes have taken place, the approximating valuation methodology used by the life company must be subject to the advice of the Appointed Actuary, in line with the requirements of Prudential Standard LPS 320 Actuarial and Related Matters.
4.3. Fair value approach
For capital reporting purposes, all relevant assets and liabilities information in the capital reporting forms are to be reported in fair value. The capital reporting forms include all reporting forms associated with the determination of the prescribed capital amount, the capital base, and other forms providing supplementary capital information.
For the purposes of valuing derivative exposures in LRF 114.2, fair value should represent an estimate of the amount which could be expected to be received from the disposal of the derivative instrument in an orderly market, ignoring transaction costs. It is not necessarily related to the nominal value of the derivative.
In preparing information for other reporting forms, all assets of a statutory fund are to be reported at fair value, with movements in fair values recognised in profit or loss and reported as revenues or expenses where relevant.
As per LPS 340, APRA also applies the fair value approach to measurement of assets backing life investment contract liabilities for its regulatory reporting which is consistent with AASB 1038 Life Insurance Contracts.
Fair value has the same meaning as defined in AASB 139 Financial Instruments: Recognition and Measurement (AASB 139), that 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, and 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 (see AASB 139).
4.4. Units of measurement
Unless otherwise indicated by the specific item instructions, all reporting forms covered by the General Instruction Guide 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.
4.5. Definitions
Definitions for the individual data items are included in the specific reporting instructions for each of the forms.
Definitions, unless specified otherwise, apply to all life insurers and friendly societies. Accordingly, the term ‘statutory fund’ has been used to refer to a statutory fund of a life company other than a friendly society or a benefit fund of a friendly society in the specific instructions. The term, ‘general fund’ has been used to refer to the shareholders’ fund of a life company other than a friendly society or the management fund of a friendly society in the specific instructions. Additionally, reference to shareholders has been used to refer to ‘members’ of a mutual association or society.
For the purpose of preparing the reporting forms covered by this document, contracts are to be classified in accordance with LPS 340.
4.6. Related parties
Where this term is used or referred to in the reporting forms, it has the same meaning as it does in AASB 124 ‘Related Party Disclosures’ (AASB 124).
In accordance with AASB 124, related party means a party that directly or indirectly through one or more intermediaries:
(a) controls, is controlled by or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries); or
(b) has significant influence over the entity or has joint control over the entity; or
(c) is an associate (as defined in AASB 128 Investments in Associates) of the entity; or
(d) is a joint venture in which the entity is a venturer (see AASB 131 Interests in Joint Ventures); or
(e) is a member of the key management personnel of the entity or its parent; or
(f) is a close member of the family of any individual referred to in (a), (b) or (e); or
(g) is an entity that its controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (e) or in (f); or
(h) is a post-employment benefit plan for the benefit of the employees of the entity, or of any entity that is a related party of the entity.
4.7. APRA Product Group classification
For consistency of reporting across the range of forms applicable to life companies, APRA adopts a single set of product groupings for life insurers and friendly societies. The appropriate APRA product groups should be used in accordance with the specific reporting form instructions.
The following tables specify the product groups applicable to life insurers and friendly societies.
4.7.1. Life insurers
Ref.
Product Group
Notes
Classification
L1
Conventional Participating
Includes whole of life policies and endowment policies.
Participating
L2
Participating Investment Account
Investment account business within the meaning of section 14 of the Act that pays participating benefits within the meaning of section 15 of the Act.
Participating
L3
Annuity with Longevity Risk
Annuities providing periodic payments that are dependent on the continuance of human life.
Non-participating
L4
Individual Lump Sum Risk
Lump sum risk policies issued on an individual (retail) basis. Includes non-participating conventional policies.
Non-participating
L5
Individual Disability Income Insurance
Disability income insurance policies issued to individuals.
Non-participating
L6
Group Lump Sum Risk
Lump sum risk policies issued on a group (wholesale) basis.
Non-participating
L7
Group Disability Income Insurance
Disability income insurance policies issued on a group basis.
Non-participating
L8[2]
Investment Linked
Investment linked policies where policy benefits are associated with the performance of the supporting assets.
Non-participating
L9
Non-par Investment Policy with Discretionary Additions
Investment account business within the meaning of section 14 of the Act that pays non-participating benefits within the meaning of section 15 of the Act.
Non-participating
L10
Other Non-par Investment Policy
Includes all other non-par investment products not specifically categorised in L8 and L9. However, do not use this Product Group unless APRA has been consulted beforehand.
Non-participating
L11
Annuity without Longevity Risk
Annuities providing periodic payments that are not dependent on the continuance of human life.
Non-participating
L12
Other
Includes all other policies not specifically categories above. However, do not use this Product Group unless APRA has been consulted beforehand.
Both Participating and Non-participating can be reported
L13
Policy Owners’ Retained Profits
Retained profits allocated to participating policy owners generally, but not yet vested as guaranteed amounts to participating policies.
Participating
L14
Shareholders’ Capital and Retained Profits
Shareholders’ capital and retained profits allocated to shareholders.
Capital
Where certain Related Product Groups (as defined in the relevant prudential standards) comprise elements from multiple APRA product groups, it is acceptable to combine these and report them in a single APRA product group.
4.7.2. Friendly Societies
Ref.
Product Group
Notes
F1
Education
F2
Investment Account
As defined in section 14 of the Life Insurance Act 1995.
F3
Annuity and Superannuation
F4
Defined Benefit Risk
All products classified as defined benefit, including defined benefit funeral products
F5
Capital Guaranteed Defined Contribution Funeral
Capital guaranteed funeral products that are classified as Defined Contribution.
F6
Investment Linked
As defined in section 14 of the Life Insurance Act 1995.
F7
Unallocated Benefit Fund Reserve
Value of benefit funds which has not been allocated to either the benefit fund members or to management fund.
F8
Members’ Capital and Retained Profits
Members’ capital and retained profits allocated to members.
The classification of participating and non-participating business does not apply to friendly societies.
5. Audit requirements
The reporting forms must be subjected to audit review and testing as detailed in Prudential Standard LPS 310 Audit and Related Matters.
6. Interpretations
In this instruction document:
AASB references made within these General Instructions relates to the latest versions of the Australian Account Standards;
Australian/overseas business relates to the business that is carried out in an Australian fund or outside Australia within an overseas fund. The meaning of an Australian fund and an overseas fund is as defined in section 74 of the Life Insurance Act 1995; and
reporting period means a reporting period as relevant in section 3 of the General Instruction Guide.