The Statutory Accounting Principles Working Group (“SAPWG”) met virtually and in person at the NAIC Fall National Meeting on December 13, 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 items that were previously exposed for comment. These items were adopted with minor revisions recommended by interested parties or regulators during the exposure period and discussed during the meeting and apply to all lines of business (Life/Fraternal, Property, Health and Title). All revisions are effective immediately, unless otherwise noted.
- Ref #INT22-02: INT 22-02: Third Quarter 2022 through First Quarter 2023 Reporting of the Inflation Reduction Act – Corporate Alternative Minimum Tax – This INT provides specific guidance for reporting of the 15% Corporate Alternative Minimum Tax (CAMT) that was was enacted as part of the Inflation Reduction Act of 2022 (the Act) on August 16, 2022.
While most insurers will not be subject to the CAMT, for those that know they are subject and those that could be subject to the CAMT, the following should be considered when determining third quarter disclosure in the Notes to Financial Statements:
- Note 9 – Income Taxes
- Disclose that the Act was enacted during the reporting period on August 16, 2022.
- Include a statement regarding whether the reporting entity (or the controlled group of corporations of which the reporting entity is a member) has determined if they expect to be liable for CAMT in 2023. For example:
- The reporting entity (or the controlled group of corporations of which the reporting entity is a member) has determined that they do not expect to be liable for CAMT in 2023.
- The reporting entity (or the controlled group of corporations of which the reporting entity is a member) has not determined as of the reporting date if they will be liable for CAMT in 2023 and that the 2022 financial statements do not include an estimated impact of the CAMT because a reasonable estimate cannot be made.
- The reporting entity (or the controlled group of corporations of which the reporting entity is a member) has determined that they expect to be liable for CAMT in 2023 and that the 2022 financial statements do not include an estimated impact of the CAMT because a reasonable estimate cannot be made.
- Note 22 – Events Subsequent
- CAMT updated estimates or other calculations affected by the Act determined subsequent to the statutory financial statement or filing date shall not be recognized as Type I subsequent events.
- Ref #2021-25: Leasehold Improvements After Lease Termination – This item revises SSAP No. 19 – Furniture, Fixtures, Equipment and Leasehold Improvements and SSAP No. 73 – Health Care Delivery Assets and Leasehold Improvements in Health Care Facilities to ensure that the guidance for the leasehold improvements matches the treatment provided in SSAP No. 40R – Real Estate Investments. The revisions will clarify that amortization of leasehold improvements will immediately end when a lease is terminated and will require that any remaining, unamortized leasehold improvement balance be immediately expensed.
- Ref #2022-09: ASU 2022-01 – Fair Value Hedging – Portfolio Layer Method – This item reflects new SAP Concepts, revising SSAP No. 86 – Derivatives with modification derivative guidance from ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities and ASU 2022-01, Fair Value Hedging – Portfolio Layer Method to incorporate the portfolio layer method and partial-term hedges for statutory reporting. The effective date of this adoption is January 1, 2023, with early adoption permitted.
- Ref #2022-10: ASU 2022-02 – Troubled Debt Restructurings and Vintage Disclosures – This item provides SAP clarification to SSAP No. 36 – Troubled Debt Restructuring. The existing guidance in SSAP No. 36 will be retained, along with revisions to the relevant literature section to identify the rejection of ASU 2022-02 and detail the GAAP/SAP differences for the accounting of troubled debt restructurings for creditors.
- Ref #2022-13: Related Parties – Footnote Updates – This item provides SAP clarification, with revisions to SSAP No. 25 – Affiliates and Other Related Parties and to SSAP No. 97 – Investments in Subsidiary, Controlled and Affiliated Entities to incorporate language to exempt foreign open-end investment funds governed and authorized in accordance with regulations established by the applicable foreign jurisdiction from the look-through provisions included in SSAP No. 25. Specifically, ownership percentage is not deemed to reflect control unless the entity actually controls with the power to direct the underlying company.
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