Statutory Accounting Principles Working Group s3

Ref #2011-23

Statutory Accounting Principles Working Group

Maintenance Agenda Submission Form

Form A

Issue: Move Appropriate Guidance from SSAP No. 93 into SSAP No. 48

Check (applicable entity):

P/C Life Health

Modification of existing SSAP

New Issue or SSAP

Description of Issue: SSAP No. 93—Accounting for Low Income Housing Tax Credit Property Investments (SSAP No. 93R) amends one paragraph in SSAP No. 48—Joint Ventures, Partnerships and Limited Liability Companies (SSAP No. 48) related to low income housing tax credits. As part of the initiative to consolidate guidance within individual SSAPs, revisions are proposed to move the relative guidance from SSAP No. 93 into SSAP No. 48:

Existing Authoritative Literature:

SSAP No. 48:

1. This statement establishes statutory accounting principles for investments in joint ventures, partnerships, and limited liability companies.

2. This statement addresses accounting for investments in any joint venture, partnership, or limited liability company whether or not it is considered to be controlled by or affiliated with the reporting entity.

SSAP No. 93:

3. Statement of Statutory Accounting Principles No. 48—Joint Ventures, Partnerships and Limited Liability Companies (SSAP No. 48) prescribes accounting treatment for the valuation of partnerships and limited liability companies. This statement supersedes paragraph 1 of SSAP No. 48, as follows:

1. This statement establishes statutory accounting principles for investments in joint ventures, partnerships, and limited liability companies. This statement does not address the accounting for investments in partnerships and limited liability companies that invest in Low Income Housing Tax Credit Properties as discussed in SSAP No. 93—Accounting for Low Income Housing Tax Credit Property Investments (SSAP No. 93). However, investments in certain state Low Income Housing Tax Credit Property Investments that do not fall within the scope of SSAP No. 93 are covered by the requirements of this statement.

Activity to Date (issues previously addressed by SAPWG, Emerging Accounting Issues WG, SEC, FASB, other State Departments of Insurance or other NAIC groups):

None

Information or issues (included in Description of Issue) not previously contemplated by the SAPWG:

None

Staff Recommendation:

It is staff’s recommendation that the Statutory Accounting Principles Working Group move this item to the nonsubstantive active listing and expose nonsubstantive revisions to incorporate changes to SSAP No. 48 and SSAP No. 93 as illustrated below: This is considered a nonsubstantive change as it does not impact any current guidance, only placement between SSAPs, making it easier to determine current guidance. (Staff notes that it is only when a SSAP is nullified as a result of a placement change is when it would be considered a substantive change.)

SSAP No. 48: (The proposed revisions reflect both the guidance from SSAP No. 93 as well as the concepts included in paragraph 2 of SSAP No. 48.)

1. This statement establishes statutory accounting principles for investments in any joint ventures, partnerships, and limited liability companies whether or not it is considered to be controlled by or affiliated with the reporting entity. This statement does not address the accounting for investments in partnerships and limited liability companies that invest in Low Income Housing Tax Credit Properties as discussed in SSAP No. 93—Accounting for Low Income Housing Tax Credit Property Investments (SSAP No. 93). However, investments in certain state Low Income Housing Tax Credit Property Investments that do not fall within the scope of SSAP No. 93 are covered by the requirements of this statement.

1. This statement establishes statutory accounting principles for investments in joint ventures, partnerships, and limited liability companies.

Effective Date and Transition

20. This statement is effective for years beginning January1, 2001. For investments made in joint ventures, partnerships and limited liability companies prior to January 1, 2001, if the joint venture, partnership or limited liability company does not prepare audited GAAP financial statements, and the reporting entity together with all other investors subject to this statement does not have sufficient voting power (pursuant to the joint venture, partnership or limited liability agreement) to force the preparation of audited GAAP financial statements, the reporting entity may then value its investment based on unaudited GAAP or audited tax-basis financial statements. A change resulting from the adoption of this statement shall be accounted for as a change in accounting principle in accordance with SSAP No.3—Accounting Changes and Corrections of Errors. Guidance in paragraph 1 was previously included within SSAP No. 93—Accounting for Low Income Housing Tax Credit Property Investments and was effective for reporting periods beginning on January 1 2006, and thereafter, with early adoption permitted. The original guidance included in this standard, and the substantive revisions reflected in SSAP No. 93 are retained for historical purposes in Issue Paper No. 125.

Subsequent paragraphs will be renumbered accordingly

SSAP No. 93:

3. Statement of Statutory Accounting Principles No. 48—Joint Ventures, Partnerships and Limited Liability Companies (SSAP No. 48) prescribes accounting treatment for the valuation of partnerships and limited liability companies. Investments in certain state Low Income Housing Credits Investments that do not fall within the scope of this statement (SSAP No. 93) are covered by the requirements of SSAP No. 48. This statement supersedes paragraph 1 of SSAP No. 48, as follows:

1. This statement establishes statutory accounting principles for investments in joint ventures, partnerships, and limited liability companies. This statement does not address the accounting for investments in partnerships and limited liability companies that invest in Low Income Housing Tax Credit Properties as discussed in SSAP No. 93—Accounting for Low Income Housing Tax Credit Property Investments (SSAP No. 93). However, investments in certain state Low Income Housing Tax Credit Property Investments that do not fall within the scope of SSAP No. 93 are covered by the requirements of this statement.

Effective Date and Transition

28. This statement is effective for reporting periods beginning on or after January 1, 2006. Early adoption is permitted. A change resulting from the adoption of this statement shall be accounted for as a change in accounting principle in accordance with SSAP No. 3. The guidance previously in paragraph 3 of this SSAP superseded paragraph 1 of SSAP No. 48. In 2011, this guidance was moved to SSAP No. 48—Joint Ventures, Partnerships and Limited Liability Companies and deleted from this SSAP. The original guidance included in this standard is retained for historical purposes in Issue Paper No. 125.

Staff Review Completed by:

Julie Gann and Linda Hunsucker – May 1, 2011

NAIC staff

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