Statutory Basis Financial Statements Say So Long to GAAP Loss Disclosures

The implementation date for the newly required loss disclosures for insurance company GAAP financial statements (ASU 2015-09) is fast approaching for non-public companies. However, we have been in a holding pattern wondering if statutory filers would be required to include these loss disclosures in the statutory basis audited financial statements.

The AICPA recently released very exciting news. They clarified the interpretation of AU-C 800, Special Considerations – Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks, that when using the insurance statutory basis of accounting, disclosures required by GAAP but rejected by the NAIC would not be included in the statutory audited financial statements. When the NAIC has not yet acted on GAAP disclosures, an assessment is required to determine whether the GAAP disclosures are needed to achieve fair presentation of the financial statements.

At its spring meeting, the NAIC rejected ASU 2015-09 so financial statements prepared using the statutory basis of accounting will not include the new loss disclosures. However, they did incorporate two new disclosures to the SSAPs:

  1.  Information about significant changes in methodologies and assumptions used in calculating the liability for unpaid claims and claim adjustment expenses, including reasons for the change and the effects on the financial statements for the most recent reporting period presented.
  2. Where discounting is used, the amount of interest accretion related to discounting recognized in the income statement and which line item it is recognized in.

Johnson Lambert hosted a webinar on the ins and outs of the new required loss disclosures for GAAP filers. The recording is available here.

Magali Welch
Magali Welch | Partner