Summary 
Developments, Key Differences & History 
Compared to IFRS 
Interpretations 
Rejection Notices 
Questions & Answers 
Articles 
AASB website 

• AASB 4 applies to:
• Insurance contracts issued and reinsurance contracts held; and
• Financial instruments issued with a discretionary participation feature.
• AASB 4 does not apply to:
• General insurance contracts, except for fixed-fee service contracts that meet the definition of insurance contract under AASB 4
• Life insurance contracts
• Product warranties issued directly by a manufacturer, dealer or retailer
• Employers’ assets and liabilities under employee benefit plans and retirement benefit obligations reported by defined benefit retirement plans
• Contractual rights or contractual obligations that are contingent on the future use of, or right to use, a non-financial item, as well as a lessee’s residual value guarantee embedded in a finance lease
• Financial guarantee contracts unless the issuer has previously asserted that it regards such contracts as insurance contacts
• Contingent consideration payable or receivable in a business combination
• Direct insurance contracts held
• AASB 139 Financial Instruments: Recognition and Measurement applies to derivatives embedded in an insurance contract, unless the embedded derivative itself is an insurance contract
• Some insurance contracts contain both an insurance component and a deposit component, and in some cases, an insurer is required or permitted to unbundle these components. To unbundle a contract, an insurer applies AASB 4 to the insurance component and applies AASB 139 to the deposit component

• An insurer:
• Must not recognise as a liability any provisions for possible future claims, if those claims arise under insurance contracts that are not in existence at the reporting date
• Must carry out the liability adequacy test (as described below)
• Must remove an insurance liability from its balance sheet only when it is extinguished
• Cannot offset reinsurance contacts against the related insurance liabilities or income or expense from reinsurance contracts against expense or income from the related insurance contracts
• Must consider whether its reinsurance contracts are impaired
• An insurer considers the adequacy of the carrying amount of its insurance liabilities by considering current estimates of future cash flows, which is known as the liability adequacy test. If the test shows that the insurance liabilities are inadequate then the entire deficiency is recognised in the income statement
• An insurer may change its accounting policies for insurance contracts only if the change makes the financial report more relevant and no less reliable, or more reliable and no less relevant. Relevance and reliability is judged based on the criteria in AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors

• An insurer is required to disclose information that identifies and explains the amounts in its financial report from insurance contracts, including:
• Its accounting policies for insurance contracts and related assets, liabilities, income and expense
• Reconciliation of changes in insurance liabilities, reinsurance assets and related deferred acquisition costs (if any)
• An insurer is required to disclose information that enables users if its financial report to evaluate the nature and extent of risks from insurance contracts, including:
• Its objectives, policies and processes for managing risks from insurance contracts and the methods used to manage those risks
• Information about insurance risk
• Information about credit risk