The Statutory Accounting Principles Working Group (“SAPWG”) held a conference call on May 29, 2019 to review and adopt three previously exposed positions as well as consider the exposure of another item. The adoptions are summarized in this post to keep our readers abreast of what is changing as a result of the conference call, in addition to a synopsis of the new exposure.
All three items were adopted as proposed, with no additional feedback from the SAPWG, regulators, or other interested parties. Each of these adoptions have been categorized as a nonsubstantive revision of SSAP and therefore are effective immediately.
- Ref #2018-32: SSAP No. 26R – Prepayment Penalties – This item revises SSAP No. 26R – Bonds to provide guidance for determining prepayment penalties for called bonds when consideration received is less than par.
- The revisions require separate recognition of a prepayment penalty as investment income when a reporting entity has a process in place to identify the prepayment penalty. Reporting entities that do not have a process in place would recognize the entire difference between the consideration received and the book/adjusted carrying value (“BACV”) of the investment as a realized gain.
- The revisions also clarify that if the consideration received is less than the BACV, the entire difference is recognized through investment income, as it would be under the yield-to-worst concept.
- This adoption is related to a concurrent exposure of the Blanks Working Group (“BWG”) 2019-10BWG. While 2019-10BWG is expected to be adopted for the 2019 Annual Statement, this guidance may impact Schedule D, Part 4 (columns 18 and 20) and Note 5.R (line 2) on your next filing, if applicable.
- Ref #2019-05: Repurchase Disclosures – This item revises SSAP No. 103R – Transfers and Servicing of Financial Assets and Extinguishments of Liabilities to reduce the disclosure requirements for repurchase and reverse repurchase transactions. The revisions modify the instructions and illustrations for Notes 5F, 5G, 5H, and 5I to eliminate both the “minimum” and “average daily balance” disclosures. Counterparty information and the default disclosure from the data-captured disclosure have also been removed as of the effective date.
- This adoption is related to a concurrent BWG exposure, 2019-11BWG. The BWG exposure has an anticipated 2019 Annual effective date.
- Ref #2019-07: Bonds Received as Property Dividends or Capital Contributions – This item revises SSAP No. 26R – Bonds and SSAP No. 72 – Surplus and Quasi-Reorganizations to provide explicit guidance in determining the initial reported value (i.e., actual cost) for bonds received as property dividends or capital contributions.
- This adoption is related to a concurrent BWG exposure, 2019-15BWG. While 2019-15BWG is expected to be adopted for the 2019 Annual Statement, this guidance may impact Schedule D, Part 3 (column 7), Schedule D, Part 4 (column 9), and Schedule DA – Part 1 (column 3) on your next filing, if applicable.
Lastly, the SAPWG exposed one nonsubstantive item for public comment. The 30-day comment period, through June 28, 2019, allows for comments to be heard and considered during the June 24, 2019 conference call being held by the BWG.
- Ref #2019-18: “Other” Derivatives – This item revises SSAP No. 86 – Derivatives to provide recognition and measurement guidance for derivatives that do not qualify as hedging, income generation, or replication (synthetic asset) transactions.
As always, Gain Compliance integrates the latest changes into the NAIC guidelines to streamline the reporting process. If there are any further questions or comments, please do not hesitate to reach out.