Updates from the Statutory Accounting Principles Working Group’s March 16 spring national meeting

SSAP No. 21R - Other admitted assets 

During the 2023 summer national meeting, SAWPG exposed revisions to SSAP No. 21R to provide guidance for the accounting for debt securities that do not qualify as bonds as well as measurement guidance for residuals.  

At the 2024 spring national meeting, SAPWG adopted revisions, classified as new SAP concepts, to SSAP No. 21R which incorporate the residual definition from SSAP No. 43R and SSAP No. 48. It adds to that definition that an equity position in an asset-backed security issuer, as defined in SSAP No. 26R, would be classified as a residual tranche. The adopted revisions require residuals to be accounted for either 1) at the lower of amortized cost or fair value, with amortized cost calculated under the allowable earned yield method, or 2) under the practical expedient method, which reflects a return of principal concept. The guidance provides separate other-than-temporary impairment calculations for residuals accounted for under these two methods. 

The revisions are effective Jan. 1, 2025. However, they permit reporting entities to early adopt the residual guidance for Dec. 31, 2024 reporting. Transition guidance addresses residuals that were accounted for under a different SSAP as of Dec. 31, 2024, and situations in which the residual was previously accounted for at the lower of amortized cost or fair value, or were accounted for at equity value or fair value. 

With this adoption, the SAP bond definition project is considered complete. NAIC staff is working on a comprehensive training program for the bond project which they hope to roll out in 2024, potentially by June 2024.  

SSAP No. 34 – Investment income due and accrued, SSAP No. 48 – Joint ventures, partnerships and limited liability companies, SSAP No. 93 – Investments in tax credit structures and SSAP No. 94R – State and federal tax credits 

This agenda item was initially exposed during the 2022 fall national meeting. The agenda item, classified as a new SAP concept, was presented along with a discussion document on potential statutory accounting concepts for tax equity investments (i.e., expansion of SSAP No. 93). The discussion document recommended that the guidance to be developed not name specific designs or other specific tax credits so that it can be applicable for all qualifying tax equity investments (not just low-income housing tax credits).  

During the 2024 spring national meeting, SAPWG adopted revisions classified as new SAP concepts, to the referenced SSAPs, effective Jan. 1, 2025. Early adoption is permitted for the SSAP No. 94 revisions. 

Readers are encouraged to review the SSAP revisions on the SAPWG website, key elements of the revisions are summarized below. 

SSAP No. 93 – Investments in tax credit structures 

• Expanded scope to include all federal and state tax credit investment structures 
• New guidance on the accounting, recognition and reporting of tax credit investment structures, including a prospective utilization assessment, which must be performed in certain circumstances to determine the admissibility of tax credit investments 
• As of Jan. 1, 2025, reporting entities will prospectively modify the recognition, accounting and reporting of tax credit investment structures 
• All tax credit investment structures that fall within the scope of SSAP No. 93 not currently reported on Schedule BA will be transferred to Schedule BA as of Jan. 1, 2025 

SSAP No. 94 – State and federal tax credits 

• Expanded scope to include all purchased, and certain allocated, state and federal income or premium tax credits 
• New guidance on the accounting, recognition and reporting for state and federal tax credits 
• As of Jan. 1, 2025, reporting entities will prospectively modify the recognition, accounting and reporting of tax credits 
• Guidance for unutilized tax credits which were carried forward from prior to Jan. 1, 2025: Federal tax credits in other-than-invested assets will be transferred and reported as a deferred tax asset in accordance with SSAP No. 101. Tax credits previously recorded at acquisition cost will be adjusted to reflect the face value of the acquired tax credits with the corresponding loss immediately recognized or the gain deferred 

SAPWG further directed NAIC staff to: 

• Sponsor a blanks proposal on the annual statement reporting categories for tax credit investment RBC 
• Send a referral to the Life Risk Based Capital Working Group to inform them of the planned reporting line changes 
• Prepare a draft issue paper to document the discussions and revisions for agenda item 2022-14 

Appendix D - Nonapplicable GAAP pronouncements 

Revisions to Appendix D reject the referenced ASU as not applicable to statutory accounting. 

Appendix D - Nonapplicable GAAP pronouncements  

Revisions to Appendix D reject the referenced ASU as not applicable to statutory accounting. 

During the 2023 fall national meeting, SAPWG exposed revisions would add a new disclosure in SSAP No. 21R, beginning with year-end 2024 reporting, with the disclosure being made in a new note and an expanded Schedule BA. The new note disclosure would identify, by the type of collateral that secures the loan, 1) the total amount of collateral loans and 2) the collateral loans admitted and non-admitted by qualifying investment type. Schedule BA was proposed to be expanded with new reporting lines to separate collateral loans by the type of collateral investment that secures the loan.  

During its virtual meeting on Feb. 20, 2024, SAPWG separated the disclosure and Schedule BA changes of this agenda item for separate actions.  

• Adopted revisions to add the new data captured disclosure 
• Exposed proposed reporting lines to Schedule BA for collateral loans. While there are no asset valuation reserve (AVR) reporting revisions, the exposure specifically requested feedback from industry and regulators on whether collateral loans backed by certain types of collateral should flow differently through AVR for RBC impact. This element of the agenda item has a public comment deadline of April 19, 2024. 

Annual statement instructions 

When the measurement method for perpetual preferred stock was revised, effective in 2021, the interest maintenance reserve (IMR)/AVR annual statement instructions were not updated to correspond. The adopted revisions to the annual statement instructions correspond to those previously adopted revisions to SSAP No. 32R by removing guidance that directs all preferred stock to be allocated between IMR/AVR based on NAIC designation and adding new guidance that corresponds to the accounting and reporting differences under SSAP No. 32R for redeemable and perpetual preferred stock. With these revisions all unrealized gains or losses on perpetual preferred stock and mandatory convertible preferred stock would reverse to realized gains or losses in the AVR formula. The revisions additionally clarify that SVO-identified Preferred Stock Exchange Traded Funds (ETFs) shall be treated as perpetual preferred stock (equities), which is consistent with SSAP No. 32R. This agenda item did not result in SSAP revisions, and the revisions will be considered by the Blanks (E) Working Group for year-end 2024 reporting. 

SSAP No. 97 - Subsidiary, controlled and affiliated entities

The adopted revisions intend to clarify the interaction between paragraph 24 and paragraphs 26 and 27 in SSAP No. 97 and to remove any perceived contradiction between those paragraphs.