G LOSSARY OF TERMS
ITEM
Associates
DEFINITION
Associates is to be interpreted in accordance with AASB 1016 Accounting for
Investments in Associates.
Central Estimate - Gross Central Estimate - Gross Outstanding Claims Liability must be calculated in
Outstanding
Claims accordance with ‘MRF 210.0 Outstanding Claims Liabilities’ and must be:
Liability
Ø Gross of reinsurance recoveries; and
Ø The ‘Central Estimate’ only. It does not include the risk margin.
Claim
Means a demand by any party external to the entity for payment by the MDO of
a policy benefit on account of an alleged loss resulting from an event or events
alleged to be covered by a policy issued by the MDO .
Claims expense
Claims expense relates to claims that occur during a financial period and are
paid in that same period and where a claims liability (and corresponding claims
expense) has been recognised for those claims which are yet to be settled in that
same period (ie movements in the Outstanding Claims Liabilities).
Claims expense includes the payment of the policy benefit amounts, claims
handling and direct and indirect claims settlement costs.
Claims
expense
in This component of claims expense relates to claims that occur during a financial
relation to current and period and are paid in that same period and where a claims liability (and
prior years
corresponding claims expense) has been recognised for those claims which are
yet to be settled in that same period (ie movements in the Outstanding Claims
Liabilities).
The outstanding claims liabilities reported in the Statement of Financial
Position does not have to be equal to, but must not be less than the amounts
required by ‘MRF 210.0 Outstanding Claims Liabilities’.
Claims paid
Amounts paid under cover provided by the MDO or reinsurance contracts
during the period.
Controlled
entity/Subsidiary
Controlled entities and subsidiaries are to be interpreted in accordance with
AASB 1024 Consolidated Accounts.
Current assets
Current assets is to be interpreted in accordance with the meaning provided in
AASB 1040 Statement of Financial Position. As a guide AASB 1040 provides
that a current asset is an asset that is expected to mature or be realised within a
12 month period.
Current liabilities
Current liabilities is to be interpreted in accordance with the meaning provided
in AASB 1040 Statement of Financial Position. As a guide, AASB 1040
provides that a current liabilities is a liability that is expected to be paid, settled
or extinguished within a period equal to or less than 12 months from the
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reporting date.
Expected
recoveries
reinsurance Expected reinsurance recoveries are those that are expected to be recovered
under reinsurance contracts.
Fair value
Market value is defined for accounting purposes as a subset of fair value, where
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, and is determined as follows:
1. The quoted market price in an active and liquid market (ie market value); or
2. when there is infrequent activity in a market, the market is not well
established, small volumes are traded relative to the asset or liability to be
valued, or a quoted market price is not available – an estimate of a price for
the asset or liability in an active and liquid market.
For the purposes of the APRA forms, fair value should ignore transaction costs.
Goodwill
AASB 1013 Accounting for Goodwill provides that goodwill represents the
future benefits from unidentifiable assets. Only goodwill which is purchased by
the entity as part of the acquisition of an asset(s) can be recognised (i.e.
internally generated goodwill must not be recognised).
Goodwill which is purchased by the entity, must be measured as the excess of
the cost of acquisition incurred by the entity over the fair value of the
identifiable net assets acquired.
Purchased goodwill must be amortised so that it is recognised as an expense in
the profit and loss account on a straight-line basis, over the period from the date
of acquisition to the end of the period of time during which the benefits are
expected to arise. This period must not exceed twenty years from the date of
acquisition
Impairment
For the purposes of the APRA forms, impairment means that there exists
reasonable doubt that amounts of principal (or market value) and any associated
amounts of accrued income (eg interest, dividends, distributions associated with
the investment / asset) will be able to be collected.
Investment
Means an asset held by an MDO for the accretion of wealth by way of revenues
such as interest, royalties, dividends, rentals and capital appreciation, but does
not include operating assets.
Joint ventures
Joint ventures is to be interpreted in accordance with AASB 1006 Accounting for
Interests in Joint Ventures
Market value
Market value is defined for accounting purposes as a subset of fair value, where
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, and is determined as follows:
1. the quoted market price in an active and liquid market (i.e. market value); or
2. when there is infrequent activity in a market, the market is not well
established, small volumes are traded relat ive to the asset or liability to be
valued, or a quoted market price is not available – an estimate of a price for
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the asset or liability in an active and liquid market.
For the purposes of the forms, market value should ignore transaction costs.
Non current assets
Non-current assets is to be interpreted in accordance with the meaning provided
in AASB 1040 Statement of Financial Position. As a guide, AASB 1040
provides that a non-current asset is an asset that is expected to be held, mature
or not to be released for a period greater than 12 months.
Non current liabilities
Non current liabilities is to be interpreted in accordance with the meaning
provided in AASB 1040 Statement of Financial Position. As a guide, AASB
1040 provides that a non-current liabilities is a liability that is expected to be
paid, settled or extinguished within a period exceeding 12 months from the
reporting date.
Off-balance
exposure
sheet Refers to items of assets or liabilities that are not recognised or recorded on the
statement of financial position e.g. contingent liabilities.
On-balance
exposure
sheet Refers to items of assets or liabilities that are recognised or recorded on the
statement of financial position.
Other reinsurance assets Other assets, which relates to reinsurance (but not claims) including deposits
receivable
from retained by reinsurers.
reinsurers
Other recoveries
These relate to recoveries other than from reinsurers. Include recoveries due
from the Government under schemes and arrangements relating to medical
indemnity matters.
Outside equity interest
Defined consistent with AASB 1024 Consolidated Accounts.
Outstanding
liabilities
claims This is the MDO’s liability for outstanding claims and recognises the potential
cost to the MDO of settling claims, which it has incurred at the reporting date
but which have not been finalised.
Parent entity
Parent entity is to be interpreted in accordance with AASB 1024 Consolidated
Accounts.
Premium
The amount charged in relation to accepting risk from the insured, but does not
include amounts collected on behalf of third parties.
Premium revenue
Premium revenue is to be recognised in line with the following:
Ø Premium revenue is to be recognised fully upfront on a prospective basis.
Any outstanding premium revenue not yet recognised should not be
deferred and amortised.
Ø Premium revenue excludes amounts collected on behalf of third parties ie
government stamp duty and taxes.
Ø Levies charged to customers are to be included as premium revenue. Such
levies are expenses of the MDO rather than government charges directly
upon those who take out the cover.
Ø Premiums refunds and rebates are to be deducted from premium revenue.
Ø Premium revenue must be gross of reinsurance expense.
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Principal value
Represents the notiona l or face value.
Reinsurance expense
Represents premium ceded to reinsurers. For prudential reporting purposes
reinsurance expense is recognised as an expense fully when incurred or
contracted. Where payments under a reinsurance contract extend beyond the
current year of cover, reinsurance expense is to be discounted using similar
discount rates as required in measuring claims liabilities in accordance with
‘GRF 210.0 Outstanding Claims Liabilities’.
Reinsurance recoveries
This is to be interpreted as the value of claims liabilities recognised by the
MDO that the MDO is entitled to receive from an insurer under the terms of
reinsurance contracts entered into be the MDO. This does not include other
recoveries.
Reinsurance recoveries This will reflect recoveries received or receivable from reinsurer that are
revenue
relating to associated with claims paid or recognised as an outstanding claims liability (as
current and prior years measured in accordance with ‘GRF 210.0 Outstanding Claims Liabilities’).
(i.e. in relation to the
outstanding
claims
liabilities)
Related parties/entities
Related parties/entities are to be interpreted in accordance with AASB 1017
Related Party Disclosures .
Reporting period
In relation to APRA forms:
Ø Reporting period end for all APRA forms (ie annual and half yearly
reporting) is based on the financial year of the MDO, not a calendar year.
Ø The financial information requested in the forms are to be reported as at the
last day of the reporting period on a financial year to date basis of the MDO.
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