The Australian Prudential Regulation Authority (APRA) has released a discussion paper dealing with changes to life company financial statements and contract classification.

The discussion paper sets out proposed changes to the prudential reporting of life company financial statements and a new prudential rule dealing with contract classification.

The new requirements are due to the introduction of the International Financial Reporting Standards (IFRS) and consequent changes to the actuarial standards under the Life Insurance Act 1995 being made by the Life Insurance Actuarial Standards Board.

Prior to the introduction of the IFRS, financial statements for life companies were generally linked with the requirements of Australian Accounting Standard AASB 1038.

APRA Executive Member Steve Somogyi says the proposed changes support the administration of the Life Insurance Act and the prudential supervision of the industry by APRA.

“The IFRS introduces some discretion in the way that contracts are treated in the accounts, which could lead to equivalent contracts being reported in different ways in regulatory reporting.”

Mr Somogyi says a separate prudential rule has been developed to ensure that similar products are reported in a like manner for all regulatory reporting by life insurance companies, including friendly societies in Australia.

The final prudential rules are expected to be released in December.