Financial Sector (Collection of Data) (reporting standard) determination No. 15 of 2007
Reporting standard MRS 310.0 Statement of Financial Performance
Financial Sector (Collection of Data) Act 2001
I, Charles Watts Littrell, a delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 and subsection 33(3) of the Acts Interpretation Act 1901:
·        REVOKE the Reporting Standard MRS 310.0: Statement of Financial Performance; and
·        DETERMINE the Reporting Standard MRS 310.0 Statement of Financial Performance in the form set out in the Schedule, which applies to the financial sector entities referred to in paragraph 1 of the reporting standard.
Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those financial sector entities on the later of 30 June 2007 and the date of registration on the Federal Register of Legislative Instruments.
 
Dated   29 June 2007
 
[Signed]
 
Charles Littrell
Executive General Manager
Policy, Research and Statistics
 
Interpretation
 
In this Determination
APRA means the Australian Prudential Regulation Authority.
 
Schedule        
Reporting Standard MRS 310.0 Statement of Financial Performance comprises 14 pages commencing on the following page.
 

Reporting Standard MRS 310.0
Statement of Financial Performance
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001. It requires medical defence organisations (‘MDOs’, as defined in paragraph 17) to report to APRA on a half-yearly basis a Statement of Financial Performance.
This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with reporting form MRF 310.0 Statement of Financial Performance and the instructions to that form (each of which is attached and forms part of this reporting standard).
 
Application
1.          This reporting standard applies to all MDOs.
Information required
2.          An MDO must, after the end of each reporting period, and in accordance with the instructions, duly complete the form in respect of the reporting period, and provide the completed form (the ‘report’) to APRA by the due date.
Method of submission
3.          Reports must be given to APRA either:
(a)    in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application;

(b)   in Microsoft Excel format on a 3.5 inch diskette, which must be posted to APRA’s head office at Level 26, 400 George Street, Sydney, NSW 2000; or

(c)    manually completed on paper, which must be faxed or mailed to APRA’s head office.
 
Note: the Direct to APRA application software and forms may be obtained from APRA but will not be available immediately upon commencement of this standard.  Therefore, initially, only methods of submission (b) and (c) will be available.
Reporting periods
4.          Subject to paragraphs 5 and 6, the reporting periods are the half-yearly period ending on 30 June 2007 and each successive half-yearly period (ending on 31 December or 30 June) after that.
5.          APRA may, by notice in writing, change the reporting periods for a particular MDO so that it is required to report in respect of half-yearly reporting periods based upon the MDO’s own year of income.
Note: this will be relevant where the MDO’s year of income does not end on 30 June or 31 December.
6.          APRA may, by notice in writing change the reporting periods for a particular MDO to require it to provide the information:
(a)    more frequently (APRA may require this when, having regard to the particular circumstances of the MDO, APRA considers it necessary or desirable for the MDO to report more frequently for the purposes of monitoring the financial position of the MDO); or

(b)   less frequently (APRA may do so when, having regard to the particular circumstances of the MDO and the extent to which its financial position requires monitoring, it is unnecessary to require it to report on a half-yearly basis).
 
Due dates
7.          Reports under this standard must be provided to APRA no later than:
(a)    in the case of a report in respect of a half-yearly period ending on the last day of the MDO’s year of income – 4 months after that day; and

(b)   in the case of all other reports – 20 business days after the end of the reporting period.
 
8.          APRA may, in writing, grant an MDO an extension of the due date for submission of a report, in which case the new due date will be the date on the notice of extension.
 
 
Audit and auditor’s certificate
9.          Reports under this standard must be the product of processes and controls that have been reviewed and tested by a registered company auditor. This will require the auditor to review and test the systems, processes, and controls supporting the reporting of the information to ensure that they produce accurate data and are otherwise reliable. This review and testing must be done on an annual basis or more frequently if necessary to enable the approved auditor to form an opinion as to the accuracy and reliability of the data. 
10.      In relation to each year of income of an MDO (including a year of income ending on 30 June 2007), the MDO must provide APRA with an annual certificate, signed by a registered company auditor, which must either:
(a)    state that in the auditor’s opinion the information provided to APRA under this standard in respect of the year of income is accurate and reliable; or

(b)   state that in the auditor’s opinion the information provided to APRA under this standard in respect of the year of income is not accurate or reliable and specify the ways in which the information is not accurate or reliable and the grounds upon which the auditor has come to this conclusion.
 
A certificate under this paragraph must be provided to APRA no later than four months after the last day of the year of income to which it relates. It may be combined with certificates under corresponding paragraphs of other reporting standards (made under section 13 of the Financial Sector (Collection of Data) Act 2001) applying to the MDO.
Authorisation
11.      Reports under this standard must also be subject to processes and controls developed by the MDO for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the MDO to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
12.      If an MDO submits a report under this standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the MDO to digitally sign, authorise and encrypt the relevant data. For this purpose APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the insurer who have authority from the insurer to transmit the data to APRA.
13.      If a report under this standard is completed in Microsoft Excel format and provided on diskette, the diskette must be sent to APRA with a letter signed by either the Principal Executive Officer or Chief Financial Officer of the MDO. 
14.      If a report under this standard is completed and provided in paper form, it must be signed by either the Principal Executive Officer or Chief Financial Officer of the MDO.
Minor alterations to forms and instructions
15.      APRA may make minor variations to:
(a)    the form, and the instructions to the form, to correct technical, programming or logical errors, inconsistencies or anomalies; or

(b)   the instructions, to clarify their application to the form
 
without changing any substantive requirement in the form or instructions.
16.      If APRA makes such a variation it must notify affected MDOs in writing.
Interpretation
 
17.      In this standard:
APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998.
business day means an ordinary business day, excluding weekends and public holidays.
Chief Financial Officer means the person having the function of chief financial officer of the MDO, by whatever name called, and whether or no t he or she is a member of the governing board of the MDO, and if there is no such person means a person who performs similar functions to those commonly performed by a chief financial officer.
due date means the relevant date under paragraph 7 or 8.
form means the attached form.
instructions means the attached instructions.
MDO means a corporation to which section 5A of the Financial Sector (Collection of Data) Act 2001 applies (but, for the avoidance of doubt, does not include a general insurer within the meaning of the Insurance Act 1973).
Principal Executive Officer means the principal executive officer of the MDO for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the MDO.
registered company auditor has the meaning in section 9 of the Corporations Act 2001.
Note: That section provides that registered company auditor:
(a)     means a person registered as an auditor under Part 9.2 of the Corporations Act; and
(b)     in relation to a body corporate that is not a company—includes a person qualified to act as the body's auditor under the law of the body's incorporation.
 
report has the meaning given in paragraph 2.
reporting period means the relevant period under paragraph 4, 5 or 6
year of income in relation to an MDO means the accounting period adopted by the MDO for the purposes of the Income Tax Assessment Act 1936 or for taxation purposes generally (whether or not that period is the same as the standard financial year beginning on 1 July and ending on 30 June).
 

 
Reporting Form MRF 310.0
Statement of Financial Performance
Instruction Guide
Introduction
This form requires Medical Defence Organisations (MDOs) to report information about their operating income.
Reporting Obligations
MDOs are required to report on a half-yearly basis (that is, six monthly intervals), based on their financial year.
For annual reporting, MDOs must lodge a form within four months of the end of their financial year.  The information required on an annual basis must be reported as at the last day of the reporting period on a financial year-to-date basis of the MDO.
For half-yearly reporting (that is, the half-year that does not correspond with the MDO’s financial year end), MDOs must lodge a form within 20 business days of the end of that six month period.
Audit Requirements
This form must be subject to audit review and testing on an annual basis or more frequently if necessary to enable the auditor to form an opinion on the accuracy and reliability of the data.  The auditor must provide a certificate to the MDO specifying whether, in their opinion, the data provided by the MDO are reliable.  The MDO must submit this certificate to APRA on an annual basis.
The scope and nature of audit testing required is outlined in the applicable Auditing and Assurance Guidance Statement issued by the Auditing and Assurance Standards Board
Definitions
Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’.
Basis of Preparation
For the purpose of this form, MDOs are required to follow Australian Accounting Standards regarding the recognition and measurement of items of income and expense (profit or loss) with the exception of the following items:
·                    Premium revenue
·                    Commission revenue
·                    Subscription and membership income
The interpretation and required measurement and recognition basis for these items are specified in these instructions below and under the appropriate item heading.
(1).        Regulatory reporting items with different measurement basis to AASB 118 Revenue (AASB 118):
·                    Premium revenue
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.
·                    Commission revenue
Commission revenue is to be recognised fully upfront on a prospective basis.  Any outstanding commission revenue not yet recognised should not be deferred and amortised.
·                    Subscription and membership income
Subscription and membership revenue is to be recognised fully upfront on a prospective basis. that is, recognised 100 percent at the date of payment to the MDO.
 
  Any subscription and membership revenue received in advance should not be accounted for as a liability.
(2).       The non-recognition of items for regulatory reporting purposes that are recognised under AASB 118 :
·                    Subscription and membership received in advance.
This item is not recognised for prudential reporting as the income is recognised fully from date of acceptance of subscription or membership.
Unit of Measurement
This form is to be prepared in thousands of Australian dollars (AUD).  Amounts denominated in a currency other than Australian currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates (AASB 121)..
Assets
Fair value of assets
Assets other than land and building and other assets that are not normally relied on to meet outstanding claims liabilities or not generally of significance in assessing the performance of a MDO should be reported at fair value. Fair value has the same meaning as defined in AASB 139 Financial Instruments: Recognition and Measurement (AASB 139).
 
Reinsurance
Limited Risk Transfer Arrangements typically do not involve significant transfer of risk over the life of the arrangement between the MDO and the reinsurer. An arrangement may involve one contract, or a combination of two or more individual contracts and/or side letters.
Such arrangements are often characterised by requirements placed on the MDO to mitigate any loss experienced by the reinsurer to this arrangement over a future period of time.
While the main purpose of such arrangements is usually financing, Limited Risk Transfer Arrangements can be used to affect the presentation of financial results. This can lead to a misrepresentation of the true prudential position of the MDO.
Where a reinsurance contract does not, despite its form, provide for the transfer of risk against loss or liability from the MDO to the reinsurer, it must not be accounted for as reinsurance, but as a form of financing. The premium paid by the ceding MDO must be recognised as an asset by the MDO and a liability by the reinsurer.
Liabilities
Outstanding claims liabilities (OCL) are to be reported in accordance with MRF 210.0 Outstanding Claims Liabilities (MRF 210.0).  All other liabilities are to be reported in accordance with applicable Australian Accounting Standards.
Netting
Unless otherwise specifically stated, MDOs can take advantage of netting agreements in relation to disclosure of data items in this form. MDOs are to comply with the prerequisite for netting outlined in Australian accounting standards notably AASB 7 Financial Instruments: Disclosures (AASB 7), AASB 139 and AASB 132 Financial Instruments: Presentation (AASB 132)..
Term to Maturity
Reference to term to maturity refers to residual term to maturity not original term to maturity.
Related party/entity
Related parties/entities are to be interpreted in accordance with AASB 124 Related Party Disclosures (AASB 124).
 
 
 
Specific Instructions
Premium revenue
Premium revenue is to be recognised in line with the following:
·        Revenue is to be recognised fully upfront as soon as the amount can be reliably measured.
·        Revenue excludes cash flows from future contracts and investment returns from current or future investments.
·        Revenue excludes amounts collected on behalf of third parties i.e. government stamp duty and taxes.  
·        Refunds and rebates are to be deducted from revenue.
Outwards reinsurance expense
Reinsurance expense is to be discounted using similar discount rates as are required in measuring OCL in accordance with MRF 210.0.
Reinsurance expense is relating to prior years.
Gross claims expense
The claims expense is to be reported in relation to business written and assumed by the MDO.
This reflects the claims expense relating to claims that occur and are paid in the same financial period and and also movements in the OCL).
NOTE:
Claims expense that relates to movements in the OCL is to be based on the OCL that is reported in MRF 300.0 Statement of Financial Position (MRF 300.0). The OCL reported in MRF 300.0 does not have to be equal to, but must not be less than the OCL reported in MRF 210.0.
Gross claims expense which is due to changes in valuation assumptions/ model (not included in underwriting result)
Disclose in this field that component of gross claims expense which is due to changes in modelling assumptions applied to the OCL. This is not added into the calculation of net incurred claims.
Reinsurance recoveries revenue
Reinsurance recoveries revenue for the reporting period is to be reported in relation to prior years. This will reflect recoveries received or receivable that are associated with claims expense recognised for business written and assumed by the MDO.
Include amounts that the MDO has recovered or is entitled to recover from reinsurers on claim expense during the reporting period. Some estimates previously made in the context of reinsurance recoverables will have been revised in the course of the year’s business. Such adjustments are to be reflected in the next reporting period as appropriate.
Other recoveries revenue
This is the revenue from claims recoveries other than reinsurance recoveries, in respect of claims. Where appropriate it is to be reported after deducting the reinsurer’s share of the ‘other recoveries revenue’.  Also include any recoveries revenue due from Government under schemes and arrangements established in relation to medical indemnity matters where relevant.
Net incurred claims
This represents the difference between “Gross claims expense” and “Total recoveries”.
Levies and charges
Report all levies and charges.
Commission revenue
Report all commission revenue.
Subscription and membership income
Report all income received from members in relation to subscription and membership fees.
Investment income
Report total investment income (this will equal the totals disclosed in MRF 310.3 Investment and Operating Income and Expense (MRF 310.3)).
Other operating income
Report income earned, which does not ordinarily come within the specific terms used above. The total will agree to the totals disclosed in MRF 310.3.
Other operating expenses
Report the operating expenses of the business in accordance with applicable accounting standards. The total will agree to the totals disclosed in MRF 310.3.
 
 
 
Profit or loss from continuing activities before income tax expense (benefit)
Derived from:
·                                  Revenue
Less:
·                                  Expenses
 
Income tax expense (or benefit)
Represents the income tax expense or benefit.
This item must be completed in accordance with the requirements of AASB 112 Income Taxes (AASB 112).
Profit or loss from continuing activities after income tax
Derived from: 
·                                Profit or loss from continuing activities before income tax expense (benefit)
Less:
·                                  Income tax expense (or benefit)
Profit (loss) from discontinued operations after income tax
Profit (loss) after income tax from discontinued operations is to be classified and recorded in accordance with the Australian accounting standards.
Net profit or loss after tax attributable to members of the MDO
Derived from:
·                                  Profit or loss from continuing activities after income tax
Plus
·                                  Profit or loss from discontinued activities after income tax.
Retained profits (losses) at beginning of the financial year
Report here the relevant retained profit (loss) amount from the previous financial year concerned. Use the retained profits figure per the statutory accounts prepared in accordance with Australian accounting standards.
Adjustments to retained profits due to change in accounting policies/standards
Include the value of aggregate adjustments to retained earnings due to changes in accounting treatment required by an accounting standard. Any IFRS related adjustments on first time adoption can be reported here.
Amounts transferred from reserves
Disclose the amount of funds transferred from other reserves to retained earnings during the reporting period.
Total available for appropriations
This is derived from:
·                                  Net profit or loss after income tax attributable to members of the MDO
Plus:
·                                  Retained profits (or losses) at beginning of financial year
Plus / less:
·                                Adjustments to retained profits due to change in accounting policies / standards
Plus:
·                                  Amounts transferred from reserves
 Other distributions of the MDO
Include any distributions paid back to the members of the company or other distributions not reported elsewhere.
Aggregate amounts transferred to reserves
Disclose appropriations to reserves from retained earnings.
Retained profits or accumulated losses at end of reporting period
This is derived from:
Total available for appropriations
Less:
·                                  Other distributions, and
·                                  Aggregate amounts transferred to reserves.