PPS Integrated Report 2021 139 | Group Accounting Policies ~Annual improvements cycle 2018 – 2020 (effective for annual periods on or after 1 January 2022) include minor changes to: – IFRS 9, ‘Financial Instruments’ has been amended to include only those costs or fees paid between the borrower and the lender in the calculation of “the 10% test” for derecognition of a financial liability. Fees paid to third parties are excluded from this calculation. – IFRS 16, ‘Leases’, amendment to the Illustrative Example 13 that accompanies IFRS 16 to remove the illustration of payments from the lessor relating to leasehold improvements. The amendment intends to remove any potential confusion about the treatment of lease incentives. ~IFRS 17, ‘Insurance contracts’ (effective for annual periods beginning on or after 1 January 2023). The IASB issued IFRS 17, ‘Insurance contracts’, and thereby started a new epoch of accounting for insurers. Whereas the current standard, IFRS 4, allows insurers to use their local GAAP, IFRS 17 defines clear and consistent rules that will significantly increase the comparability of financial statements. For insurers, the transition to IFRS 17 will have an impact on financial statements and on key performance indicators. Under IFRS 17, the general model requires entities to measure an insurance contract at initial recognition at the total of the fulfilment cash flows (comprising the estimated future cash flows, an adjustment to reflect the time value of money and an explicit risk adjustment for non-financial risk) and the contractual service margin. The fulfilment cash flows are re-measured on a current basis each reporting period. The unearned profit (contractual service margin) is recognised over the coverage period. Aside from this general model, the standard provides the premium allocation approach. This simplified approach is applicable for certain types of contract, including those with a coverage period of one year or less. For insurance contracts with direct participation features, the variable fee approach applies. The variable fee approach is a variation on the general model. When applying the variable fee approach, the entity’s share of the fair value changes of the underlying items is included in the contractual service margin. As a consequence, the fair value changes are not recognised in profit or loss in the period in which they occur but over the remaining life of the contract. The amendments will result in a material impact on the Group’s financial statements. In response to some of the concerns and challenges raised, the IASB developed targeted amendments and a number of proposed clarifications intended to ease implementation of IFRS 17, simplify some requirements of the standard and ease transition. The amendments relate to eight areas of IFRS 17, and they are not intended to change the fundamental principles of the standard or unduly disrupt implementation already underway. 2. CONSOLIDATION The financial statements include the assets, liabilities and results of the operations of PPS Holdings Trust (‘Parent’) and its subsidiaries (together ‘the Group’). Subsidiaries Subsidiaries are entities over which the Group directly or indirectly has control. An investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investees and has the ability to affect those returns through its power over the investee. Subsidiaries are consolidated from the date on which the Group obtains control. Subsidiaries are deconsolidated when control ceases. All the Group subsidiaries were created by the Group. There are no acquired subsidiaries and there is no goodwill arising on consolidation. All unit trusts which are managed by a controlled subsidiary of the Group are consolidated, irrespective of the Group’s economic interest. Third Party unit trust holders’ interests in unit trusts are liabilities of the unit trust and are classified as such in the Group.
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