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PR No. 47 Rules/Other as made
Revokes and determines Prudential Rule 47 under subsection 252(1) of the Life Insurance Act 1995.
Administered by: Treasury
General Comments: This Determination revokes Prudential Rules No. 47 - Friendly Society Financial Statements (22/02/2005) with effect from 31/05/2006. Prudential Rules No. 47 - Friendly Societies Financial Statements (19/04/2006) was revoked by Life Insurance (Prudential Rules) determination No. 2 of 2007 - Prudential Rules No. 12 - Restricted Investments Returns; Prudential Rules No. 26 - Collection of Statistics; Prudential Rules No. 35 - Financial Statements; Prudential Rules No. 47 - Friendly Society Financial Statements; Prudential Rules No. 48 - Collection of Statistics - Friendly Societies; Prudential Rules No. 49 - Contract Classification for the purpose of regulatory reporting to APRA with effect from 01/01/2008.
Registered 28 Apr 2006
Tabling HistoryDate
Tabled HR09-May-2006
Tabled Senate09-May-2006
Date of repeal 01 Oct 2016
Repealed by Sunsetting
Table of contents.

Life Insurance (Prudential Rules) Determination No. 2 of 2006

Prudential Rules No 47 – Friendly Society Financial Statements

Life Insurance Act 1995

I, John Francis Laker, Chair of APRA, a delegate of APRA, under subsection 252(1) of the Life Insurance Act 1995 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901:

·        REVOKE as from 31 May 2006 the Prudential Rules No. 47 (made on 22 February 2005 under subsection 252(1) of the Act for the purposes of subsection 82(5) of the Act,); and

·        MAKE the Prudential Rules No. 47 set out in the Schedule for the purposes of subsection 82(5) of the Act.

This Determination shall take effect upon registration on the Federal Register of Legislative Instruments.

 

 

Dated   19 April 2006

 

 

 

 

[Signed]

 

J F Laker

Chair


 

Interpretation

In this Determination

a          APRA means the Australian Prudential Regulation Authority.

b          Friendly society means a company registered under the Act which is a friendly society

 

Schedule   

Prudential Rules No. 47 comprise the 29 pages commencing on the following page.

 


 

Prudential Rules No. 47

Friendly Societies Financial Statements

Life Insurance Act 1995 (s 82(5))

These Prudential Rules are made under subsection 252(1) of the Act for the purposes of subsection 82(5) of the Act and apply to friendly societies.

 

Part 1 – Basic requirement

Financial statements must comply with these rules

1.             The financial statements mentioned in subsections 82(1) and (2) of the Act must comply with these rules.

 

Part 2 – Commencement, application and interpretation

Commencement and application

2.             These rules:

(a)           take effect on 31 May 2006; and

(b)          apply in relation to a financial year of a friendly society ending on or after 31 May 2006.

 

Interpretation

3.             In these rules:

(a)           “AASB”, accompanied by a number, means the Accounting Standard made by the Australian Accounting Standards Board, which is designated by that number, as in force from time to time;

(b)          accounting standards” means the Accounting Standards made by the Australian Accounting Standards Board, as in force from time to time; and those Australian Accounting Standards issued by the Australian Accounting Research Foundation for which there is no corresponding applicable Accounting Standard made by the Australian Accounting Standards Board, as in force on 31 December 2005;

(c)           actuarial standards” means the actuarial standards made by the Life Insurance Actuarial Standards Board under the Act, as in force from time to time;

(d)          Corporations Act” means the Corporations Act 2001 as amended from time to time;

(e)           economic entity” has the same meaning as in accounting standards and the Corporations Act;

(f)            entity” has the same meaning as in accounting standards and the Corporations Act;

(g)           fair value” means the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction;

(h)           general purpose financial statements” means the financial statements as required under the Corporations Act;

(i)             regulatory financial statements” means the financial statements as required under subsections 82(1) and 82(2) of the Act and in the form submitted to APRA in accordance with the Schedules to these rules;

(j)            parent company” has the same meaning as in accounting standards and the Corporations Act;

(k)          policy conversion” means:

(i)            a policy ceasing to be referable to one benefit fund of a friendly society and becoming referable to another benefit fund of the friendly society; or

(ii)           a policy referable to one or more benefit funds of a friendly society becoming referable to a further benefit fund or funds of the friendly society,

 as a consequence of a change in the terms and conditions of the policy.

(l)             surplus”, for the purposes of the Act, means the same as net assets.

 

4.             In these rules, whether one entity controls another is to be determined in accordance with the accounting standards and the Corporations Act.

5.             In its application to a company other than a company limited only by shares, a provision of these rules that includes the expression “shareholders” is to be read as if “members having an interest in the management fund of the friendly society” were substituted for “shareholders”.

6.             Where these rules are applied to regulatory financial statements, a reference in these rules to a financial year includes a reference to a period other than a financial year.

7.             A reference in these rules to a thing being in accordance with, or required by, the accounting standards or the Corporations Act is a reference to that thing being in accordance with, or required by, the accounting standards or the Corporations Act as they are applied to regulatory financial statements by rule 9 of these rules.

8.             Where the context permits, a reference in these rules to an income statement or balance sheet includes a reference to a consolidated income statement or consolidated balance sheet, respectively.

 

Part 3 – Application of accounting standards, actuarial standards and Corporations Act

Regulatory financial statements must comply with accounting standards and the Corporations Act

9.             Regulatory financial statements must comply with the following, to the extent that they are not inconsistent with these rules:

(a)           the accounting standards; and

(b)          the provisions of the Corporations Act which specify requirements relating to the form and content of a financial report (within the meaning of the Corporations Act).

[NOTE: Accounting standards AASB 1038 – Life Insurance Contracts, AASB 139 – Financial Instruments: Recognition and Measurement, AASB 118 – Revenue, AASB 138 – Intangible Assets and AASB 136 – Impairment of Assets apply in relation to financial periods ending on or after 31 December 2005.]

Actuarial valuations and calculations must be in accordance with actuarial standards

10.         Actuarial valuations and calculations included in regulatory financial statements must be in accordance with the actuarial standards, except where specifically allowed under transitional arrangements agreed in writing between APRA and the friendly society.

How are assets to be valued?

11.         Notwithstanding the requirements of the relevant accounting standards, all assets of a benefit fund must be measured at fair value, with movement in fair value recognised in the income statement.

How are policies to be classified?

12.         All policies are to be categorised as either life insurance contracts or life investment contracts in accordance with accounting standards, but subject to the further constraints imposed by Prudential Rules No. 49 – Contract Classification (PR 49), and treated accordingly for the purposes of the actuarial standards and the regulatory financial statements prepared in accordance with these rules.

13.         In relation to the reporting of revenue, expense and liabilities of a benefit fund, the regulatory financial statements mentioned in Part 4 and the notes mentioned in Part 5 must deal separately with:

(a)           life insurance business that consists of life insurance contracts;

(b)          life insurance business that consists of investment-linked contracts; and

(c)           life insurance business that consists of other life investment contracts.

 

Part 4 – What regulatory financial statements must comprise

14.         Regulatory financial statements of a friendly society must comprise a financial report that contains:

(a)           an income statement in the form specified in Forms B1, B2, C1, C2 and C3 in the Schedule to these rules that truly represents the profit or loss of the management fund and each benefit fund of the friendly society determined in accordance with the requirements of the Act and these rules, for the financial year; and

(b)          a balance sheet in the form specified in Forms B5, B6, C6 and C9 in the Schedule to these rules that truly represents the financial position of the management fund and each benefit fund of the friendly society consistent with the requirements of the Act and these rules, as at the end of the financial year; and

(c)           the additional information mentioned in Part 5; and

(d)          statements and reports (including the directors’ report, appointed actuary’s statement and auditor’s report mentioned in Part 6) attached to, or intended to be read with, that income statement or balance sheet.

15.         Subject to rule 18, where the friendly society is a parent company in an economic entity:

(a)           the income statement for the management fund, as specified in Forms C1, C2 and C3, must include a consolidated income statement that truly represents the profit or loss determined in accordance with the requirements of the Act and these rules, for the financial year to which the regulatory financial statements relate, of the economic entity constituted by the friendly society and the entities that it controlled from time to time during the financial year; and

(b)          the balance sheet for the management fund, as specified in Forms C6 and C9, must include a consolidated balance sheet that truly represents the financial position consistent with the requirements of the Act and these rules, as at the end of the financial year, of the economic entity constituted by the friendly society and the entities that it controlled at the end of the financial year; and

(c)           the other information mentioned in Part 5 relating to the management fund  must include consolidated figures in respect of the economic entity constituted by the friendly society and the entities that it controlled from time to time during the financial year where required; and

(d)          statements and reports attached to, or intended to be read with, the financial report must encompass the consolidated statements in rules 15 (a), (b) and (c).

Regulatory financial statements must be in English and in Australian currency

16.         Regulatory financial statements must be in English with all amounts in Australian currency.

Amounts may be rounded off

17.         Amounts in regulatory financial statements may be rounded off in accordance with the Corporations Act.

Benefit Funds must not be consolidated into the Management Fund

18.         Despite any requirements of the accounting standards, the information provided in Forms C1 to C6, C9, C10 and C12 must not include consolidated benefit fund information.

 

Part 5 – Notes to be included in regulatory financial statements

19.         Regulatory financial statements must contain the additional information specified in forms B3, B4, B7, B13, B14, C4, C5, C10 and C12 of these rules.

20.         The notes mentioned in rule 19 must:

(a)           deal separately with:

(i)            the management fund; and

(ii)           each benefit fund; and

(b)          provide consolidated information in accordance with these rules.

21.         When a friendly society submits to APRA its regulatory financial statements prepared in accordance with Prudential Rules No. 47 for the first reporting period commencing on or after 31 May 2006, the friendly society must also submit to APRA the information contained in the Table concerning the derivation of any adjustments to surplus on first time adoption of IFRS.

22.         The regulatory financial statements must be submitted to APRA in electronic form in addition to the paper copies of the regulatory financial statements which are required to be submitted under Section 118 of the Act.

 

Part 6 – Declaration, statement and report to be attached to regulatory financial statements

Directors’ declaration must be attached to regulatory financial statements

23.         A single directors’ declaration must be prepared covering each and every fund. There must be attached to the regulatory financial statements of a friendly society a declaration by its directors stating whether or not, in their opinion:

(a)           the regulatory financial statements are properly drawn up in accordance with the requirements of the Act and these rules; and

(b)          the income statement truly represents the profit or loss determined in accordance with the requirements of the Act and these rules, for the financial year to which the regulatory financial statements relate, of:

(i)            the friendly society; or

(ii)           the economic entity constituted by the friendly society and the entities that it controlled from time to time during the financial year; and

(c)           the balance sheet truly represents the financial position consistent with the requirements of the Act and these rules, as at the end of the financial year, of:

(i)            the friendly society; or

(ii)           the economic entity constituted by friendly society and the entities that it controlled at the end of the financial year; and

(d)          the distribution of the surplus of the benefit funds of the friendly society has been made in accordance with Divisions 5 and 6 of Part 4 of the Act and the approved benefit fund rules of each benefit fund; and

(e)           any assets of the benefit funds of the friendly society have been applied or invested in contravention of the Act; and

(f)            there are reasonable grounds to believe that, as at the time the statement is made, the management fund of the friendly society and each of the benefit funds of the friendly society will be able to pay all debts or claims that are referable to it.

24.         The directors’ declaration must:

(a)           be made in accordance with a resolution of the directors; and

(b)          specify the day on which it was made; and

(c)           be signed by at least 2 directors.

Appointed actuary’s statement must be attached to regulatory financial statements

25.         There must be attached to the regulatory financial statements of a friendly society a statement by its appointed actuary stating whether or not, in his or her opinion:

(a)           the value of the policy liabilities of the friendly society and the solvency of the friendly society have been determined using methods and assumptions consistent with the actuarial standards; and

(b)          the distribution of the surplus of the benefit funds of the friendly society has been made in accordance with Divisions 5 and 6 of Part 4 of the Act and the approved benefit fund rules of each benefit fund; and

(c)           proper records have been kept by the friendly society from which its policy liabilities and solvency have been properly determined.

26.         If, in the appointed actuary’s opinion, the regulatory financial statements contain information based on actuarial valuations or calculations which do not comply with the actuarial standards, the actuary’s statement must:

(a)           be appropriately qualified; and

(b)          state the fund or funds to which the qualification applies; and

(c)           give particulars of the non-compliance; and

(d)          to the extent practicable, quantify the financial effects of the non-compliance.

Auditor’s report must be attached to regulatory financial statements

27.         There must be attached to the regulatory financial statements of a friendly society a report by its auditor in a form which complies with:

(a)           the Australian Auditing Standards issued by the Audit and Assurance Standards Board (AUASB), as in force at the time the audit was carried out; and

(b)          the Corporations Act, including section 308; and

(c)           the Act, including subsection 83(3); and

(d)          rule 28 of these rules,

to the extent that they apply for the purposes of these rules.

28.         The auditor’s report must include a statement by the auditor of the friendly society as to whether or not, in his or her opinion, any part of the assets of the benefit fund has been applied directly or indirectly in contravention of Division 1 of Part 4 and Division 4 of Part 2A of the Act.

[NOTE: An auditor’s report complying with rules 27 and 28 will satisfy the requirements of subsection 83(3) of the Act.]

29.         Rules 27 and 28 must be read as requiring the auditor to form a separate opinion in relation to each fund but to provide those opinions in a single document.

30.         Any qualification or emphasis of matter must specify the fund or funds to which it relates and, to the extent practicable, quantify the effect of the non-compliance separately for each fund. If it is not practical to quantify the effect on each fund fully, the report must say why.

 

Part 7 – General Purpose Financial Statements to be submitted to APRA

31.         When a friendly society submits to APRA its regulatory financial statements prepared in accordance with these rules, the friendly society must also submit to APRA a copy of its general purpose financial statements in respect of the same financial year.