The Statutory Accounting Principles Working Group (“SAPWG”) met virtually and in person at the Summer National Meeting on August 10, 2022. This post is intended to provide an informative snapshot of what was accomplished during the meeting, as well as help accelerate your determination of the impact the adoptions and modifications will have on your financial statements.
Adopted Items
The SAPWG reviewed and adopted the following seven items that were previously exposed for comment. The items were adopted after minimal or no discussion or commentary from the SAPWG, NAIC staff, or interested parties. All revisions are effective immediately and apply to all lines of business (Life/Fraternal, Property and Health), unless otherwise noted.
- Ref #2021-20: Effective Derivatives – ASU 2017-12 – This item reflects new SAP concepts, incorporating new guidance in SSAP 86 – Derivatives (as a new Appendix A) on assessing hedge effectiveness that is consistent with U.S. GAAP, with additional guidance on permitted excluded components and the appropriate measurement for those excluded items. The effective date of this adoption is January 1, 2023, with early application permitted. Revisions should be applied prospectively for all new and existing hedges. The adoption of this guidance should be detailed as a change in accounting principle pursuant to SSAP No. 3 – Accounting Changes and Corrections of Errors and disclosed in Note 2. With this adoption, SAPWG will sponsor a Blanks proposal to incorporate new Schedule DB reporting fields (electronic-only) and templates to capture the new disclosures for excluded components with a December 31, 2023 effective date.
- Ref #2022-01: Conceptual Framework – Updates – This item adopts Issue Paper No. 166 – Updates to the Definition of an Asset and clarifying revisions to SSAP No. 4 – Assets and Nonadmitted Assets. The issue paper documents the changes in the definition of an asset and rationale regarding why the revisions to SSAP No. 4 are considered SAP clarifications in nature and that the intent of the revisions is to align current statutory accounting guidance, specifically the definition of an “asset” with the term utilized by the Financial Accounting Standards Board (FASB).
- Ref #2022-02: SSAP No. 48 – Alternative Valuation of Minority Ownership Interests – This item modifies SSAP No. 48 – Joint Ventures, Partnerships and Limited Liability Companies to clarify that the audit of an entity utilizing the U.S. tax basis equity valuation exception shall occur at the investee level.
- Ref #2022-04: ASU 2021-10, Government Assistance – This item is a SAP clarification, incorporating certain disclosures from ASU 2021-10, Government Assistance, Disclosures by Business Entities about Government Assistance to SSAP No. 24 – Discontinued Operations and Unusual or Infrequent Items. The additions will supplement existing disclosures to require that if the unusual or infrequent item is as the result of government assistance, the transaction will require identification as well as a description of the terms and provisions of the assistance received. The additional disclosures are not applicable for transactions that are in the scope of other accounting standards and the NAIC believes the occurrence of such items requiring disclosure will be infrequent.
- Ref #2022-05: ASU 2021-09, Leases, Discount Rates for Lessees – This item modifies SSAP No. 22R – Leases to reject ASU 2021-09, Leases (Topic 842), Discount Rate for Lessees That Are Not Public Business Entities for statutory accounting.
- Ref #2022-06: ASU 2021-07, Compensation – Stock Compensation – This item modifies SSAP No. 104R – Share-Based Payments to incorporate the practical expedient from ASU 2021-07, Compensation – Stock Compensation, Determining the Current Price of an Underlying Share for Equity-Classified Share-Based Awards for the current price input for non-public entities, a required component for the option-pricing models which are utilized in the determination of fair value for share-based payments.
- Ref #2022-07: ASU 2021-08, Business Combinations – This item modifies SSAP No. 47 – Uninsured Plans and SSAP No. 68 – Business Combinations and Goodwill to reject ASU 2021-08, Business Combinations, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers for statutory accounting. In addition, the revisions to SSAP No. 68 includes notation that the rejection of ASU 2021-08 does not impact the determination of U.S. GAAP book value in an acquired entity, which is utilized for the determination of statutory goodwill.
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