12 Days of SSAP: Simplifying Accounting for Income Taxes

JLK Rosenberger is carrying on our holiday tradition of taking a new perspective on a holiday classic – the Twelve Days of Christmas. Rather than filling your head with turtle doves and gold rings, we are focusing on the latest changes to SSAP and how they will impact your insurance entity in 2026 and beyond.

Our Day 9 post addresses a recent FASB update issued to clarify certain income tax application in the preparation of GAAP-based financial statements. The Statutory Accounting Principles Working Group (SAPWG) has rejected the majority of the ASU 2019-12 promulgation for statutory reporting purposes with the specific exception of incorporating the handling of certain interim period applications involving implementation of changes in enacted tax rates and their timing of incorporation into the quarterly period statutory financial statements (in essence APB 18, ⁋ 20).

What Happened?

On December 9, 2025, SAPWG adopted ASU 2019-12, Income Taxes (Topic 740) with modifications as a clarification to SSAP No. 101, Income Taxes.

The adoption was intentionally limited. Only revisions to ASC 740-270-25-5 were incorporated—guidance that traces back to APB Opinion No. 28, Interim Financial Reporting (paragraph 20). Importantly, that APB guidance was already adopted by reference in SSAP No. 101, making this update more of a clarification than a shift in statutory accounting practice.

Why ASU 2019-12 Matters Under GAAP (But Mostly Not Under Statutory)

Under GAAP, ASU 2019-12 was designed to reduce complexity and improve consistency in income tax accounting. It removes several long-standing exceptions and clarifies how entities recognize deferred tax balances and account for changes in tax law.

Key GAAP impacts include:

• Eliminating exceptions related to intraperiod tax allocation, goodwill tax basis, and intra-entity asset transfers
• Clarifying guidance on deferred tax assets and liabilities
• Simplifying how enacted tax rate changes are reflected in financial statements

For GAAP reporters, these changes improve comparability and reduce operational burden.

Why Statutory Accounting Took a Different Path

SAPWG concluded that most of ASU 2019-12 addresses issues that simply don’t exist in statutory accounting, including:

• Statutory reporting does not use a consolidation framework—insurers report on a legal-entity basis
• State and franchise taxes are not deferred under statutory principles
• The ASU’s expanded examples are not part of SSAP No. 101

Given these fundamental differences, wholesale adoption would have added complexity without corresponding benefit.

The One Piece That Did Make the Cut

SAPWG adopted the ASU’s revisions to ASC 740-270-25-5, which address how changes in enacted tax rates are recognized during interim periods. This clarification aligns statutory quarterly reporting with established interim-period principles and ensures consistency in timing and presentation.

In short: limited scope, practical impact.

Effective Date

Immediately

Deep Dive

You can read more at the NAIC here.