Basis of preparationBasis of preparation

Basis of preparation

In completing this form, 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.

Asset values are to include interest or dividend income accrued but not received. All assets of a statutory fund are to be reported in this form at Fair Value, with movements in Fair Values recognised in Profit or Loss. NB this treatment differs from Australian accounting standards, which do not allow assets to be valued at Fair Value in all circumstances eg owner occupied property.

Actuarial valuations and calculations included in, or used in the preparation of, the form must be in accordance with prudential standards.

Whilst maintaining that the requirements of Prudential Standard LPS 6.03 Management Capital Standard (LPS 6.03) apply on a continuous basis, APRA recognises that for some periods life insurance companies (including friendly societies) 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 insurance companies (including friendly societies) will utilise their best endeavours to ensure that any estimations adopted 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. APRA generally expects that the approximation methodology used will be approved by the Appointed Actuary; this provides an assurance that he or she is satisfied that the methods should be reasonably acceptable and consistent with the requirements in LPS 6.03.

If additional clarification is required for specific items in this form, reference should be made to the section ‘Instructions for specific items’, which is provided as a guide.