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Farewell GAAP Loss Disclosures for Statutory Basis Financial Statements
By Magali Welch, CPA, CA, AIAF, Partner
Statutory filers have been waiting on the edge of their seat speculating whether the newly required loss disclosures for insurance company GAAP financial statements (
) would be applicable to statutory basis audited financial statements. We’ve got some marvelous news for you!
recently clarified its interpretation of AU-C 800, Special Considerations - Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks. When the NAIC rejects disclosures required by GAAP, those disclosures would not be included in the statutory audited financial statements. However, if the NAIC has not acted on GAAP disclosures, insurance companies should determine whether the GAAP disclosures are needed to achieve fair presentation of the statutory basis financial statements.
rejected ASU 2015-09 at its spring meeting, so statutory basis financial statements will not include the new loss disclosures.
The NAIC did adopt two new disclosures which are required in the statutory basis financial statements:
-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.
-If discounting is used, the amount of interest accretion related to discounting recognized in the income statement and which line item it is recognized in.
The industry can breathe a collective sigh of relieve regarding the new interpretation and action taken by the AICPA.
Pictured: Magali Welch
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