Basis of preparationBasis of preparation

Basis of preparation

In completing these forms, 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, specifically in regard to the:

• interpretation/definition of specific asset, liability and equity items;
• appropriate measurement basis for asset, liability and equity items; and
• netting of financial assets and financial liabilities.

Actuarial valuations and calculations included in, or used in the preparation of, the forms must be in accordance with prudential standards. APRA recognises that for some periods life insurance companies may not carry out full accounting, actuarial and other 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 companies will utilise their best endeavours to ensure that any estimations 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.

If additional clarification is required for specific asset, liability or equity items in these forms, reference should be made to the section “Instructions for specific items”, which is provided as a guide.

The look-through adjustment item under an asset or liability category in these forms represents the adjustment required to convert effective holdings in investments via trusts from the “Equities/unit trusts” category to the appropriate categories on a look-through basis. In the case of owner-occupied property, this item also converts the effective holding from the Non-investment assets class to the Property class. The net of all look-through adjustment items listed in these forms (both for trusts and property) should be zero.

The level to which look through is taken should be consistent with LRF 100.0 Solvency, LRF 110.0 Capital Adequacy and LRF 120.0 Management Capital.

The hedging adjustment item under an asset or liability category in these forms represents the adjustment required to translate the effective exposure associated with hedging instruments. The net of all hedging adjustment items listed in these forms should therefore be zero.

For the purposes of reporting under these forms, contracts are to be classified in accordance with Prudential Standard LPS 350 Contract Classification for the Purpose of Regulatory Reporting to APRA (LPS 350).