Treatment is to be consistent with AASB 139 ‘Financial Instruments: Recognition and Measurement’.

Where the transferee of the security effectively receives a lender’s rate of return, or a return that does not correlate with ownership of the securities (i.e. the risks and rewards of ownership of the underlying securities is not effectively transferred), these transactions are to be accounted for as collateralised borrowing or lending activities.

Under this method of accounting for transactions that satisfy the above, do not adjust (i.e. increase or decrease) the physical Investment security holdings/portfolios (interest rate and equity investments) for the securities that are subject to these agreements. For the required prudential treatment for securities meeting the above conditions, refer to treatment as noted in the instructions for GRF 300.0 Statement of Financial Position.

Securities Transacted not Settled (i.e. trade date accounting)

For the purposes the APRA forms include market related securities that are recorded on a trade date basis and transacted in accordance with accepted financial market settlements periods. Such securities are to be included in the respective investments forms. These do not constitute forward asset purchases for the purposes of GRF 130.0 Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge.

Subordinated Debt

Subordinated debt has the same meaning as in GPS 114. Subordinated debt is any debt instrument issued by a company (whether Australian or foreign) that constitutes debt subordination within the meaning of subsection 563C(2) of the Corporations Act but with the references in the subjection to “Company” to be read as including foreign corporations. This definition does not apply to debt instruments issued by an SPV set up for the purpose of securitising an asset or a pool of assets. Any debt instruments issued by such an SPV are to be treated as ordinary debt instruments with the Investment Risk Capital Charge applied according to the issue-specific counterparty rating.

Investments in subordinated debt instruments are to be reported either in GRF 140.1 Investments – Direct Equity holdings and Risk Charges or GRF 140.4 Investments – Indirectly Held by the Insurer and Risk Charge. Under GPS 114 the investment risk charge of subordinated debt instruments are lower to other equities instruments.

Related parties

Where this term is used or referenced in these forms, related parties is to be interpreted consistently with its definition and meaning as contained in AASB 124 ‘Related Party Disclosures’.

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);